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Three Essays on Corporate Financial Misconduct and Market Reactions
de Batz de Trenquelléon, Laure ; Kočenda, Evžen (vedoucí práce) ; Havránek, Tomáš (oponent) ; Brůna, Karel (oponent) ; Karpoff, Jonathan M. (oponent)
Chapter 1 Summary of the Dissertation "We are in the golden age of fraud." Jim Chanos, Kynikos Associates, Financial Times 24/07/2020. Beyond the speculations about the consecutive waves of Covid, 2020 will be reminded for one of the most notorious failures of a listed firm, due to a massive accounting fraud: the German payment fintech Wirecard. The firm, with 30 subsidiaries in 26 countries, joined the prestigious DAX index just two years before. The spillovers of the billion-euro fraud range from the arrest of top managers to suspicion of auditors, politicians, and regulatory authorities (BaFin, European Commission, and ESMA), as suggested the Financial Times headline "Why was Frankfurt so blind for so long?"1 Such a failure serves as a reminder of the relevance of financial markets regulation, oversight, and enforcement, in order to protect investors and to encourage compliance with regulations. Research on the relationship between the publication of financial misconducts and financial performance for corporates has continuously grown, as illustrated by the recent in- depth literature reviews undergone by Amiram et al. (2018) and Liu and Yawson (2020). It is fueling regulatory debates on how to enforce more efficiently financial regulations. Some specificities of white-collar crimes must be accounted for...
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Financial Crime and Punishment: A Meta-Analysis
de Batz, L. ; Kočenda, Evžen
We examine how the publication of intentional financial crimes committed by listed firms is interpreted by financial markets, using a systematic and quantitative review of existing empirical studies. Specifically, we conduct a meta-regression analysis and investigate the extent and nature of the impact that the publication of financial misconducts exerts on stock returns. We survey 111 studies, published between 1978 and 2020, with a total of 439 estimates from event studies. Our key finding is that the average abnormal returns calculated from this empirical literature are affected by a negative publication selection bias. Still, after controlling for this bias, our meta-analysis indicates that publications of financial crimes are followed by statistically significant negative abnormal returns, which suggests the existence of an informational effect. Finally, the MRA results demonstrate that crimes committed in common law countries, alleged crimes, and accounting crimes carry particularly weighty information for market participants. The results call for more transparency on side of enforcers along enforcement procedures, to foster timely and proportionate market reactions and support efficient markets.
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