Financial Misconduct: Investor Reactions Across Industry Contexts
Keywords
No Thumbnail Available
Authors
Issue Date
2025-07-04
Language
en
Document type
Journal Title
Journal ISSN
Volume Title
Publisher
Title
ISSN
Volume
Issue
Startpage
Endpage
DOI
Abstract
This study examines how investors respond to financial misconduct and to what extent the industry context, particularly the difference between consumer-oriented and institutional sectors, influences these responses. Based on an event study analysis of 689 observations of listed US companies that reported financial misconduct between 2010 and 2024, cumulative abnormal returns (CARs) are analysed around the time of disclosure. Contrary to previous literature, no systematic negative price reactions to the disclosure of misconduct are found. Regression analysis also shows that companies in consumer-oriented sectors are not penalised more severely than their institutional counterparts when controlling for company characteristics such as size, profitability and penalty amount. These findings suggest that investors do not base their investments on cases of financial misconduct, and also do not react differently in consumer-facing sectors compared to institutional-facing sectors. This sheds new light on how financial markets evaluate ethical missteps by companies.
Description
Citation
Supervisor
Faculty
Faculteit der Managementwetenschappen