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Financial Crime Spillovers. Does One Gain to Be Avenged?

Author

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  • Laure de Batz

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic
    Laboratory of Excellence for Financial Regulation (LabEx-ReFi), University Paris 1 Panthéon-Sorbonne (CES))

Abstract

This paper examines the spillovers of the sanction procedures on listed companies which were victims of others’ financial regulatory breaches (i.e. regulated entities or individuals). Market manipulators can be investigated and possibly sanctioned for doing so, according to the French enforcement scheme. This research enriches past literature with a new complementary perspectivebon victims. Past work typically focused on abnormal returns primarily for investigated and/or sanctioned listed companies, as well as for plaintive firms, in a wide range of jurisdictions. The results demonstrate that victim firms suffer, on average, significant negative abnormal returns after the sanction. Naming victims hence may possibly be synonym of double punishment, as the firms already suffered during the violation period. It demonstrates a market failure where victims are not properly differentiated from wrongdoers. This article investigates the information content of such market behavior. The markets also incorporate the information content of the decision and of the parties at stake. All in all, those results plead for an anonymization of victims over the enforcement process, to protect from being sanctioned, and possibly suggest to name and shame market manipulators.

Suggested Citation

  • Laure de Batz, 2019. "Financial Crime Spillovers. Does One Gain to Be Avenged?," Working Papers IES 2019/22, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2019.
    • Handle: RePEc:fau:wpaper:wp2019_22
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/6113/lang/cs
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    Cited by:

    1. Bai, Caiquan & Wang, Huimin & Xue, Qihang & Zhao, Yaping, 2025. "Financial crime and corporate social responsibility: Evidence from China," Journal of International Money and Finance, Elsevier, vol. 151(C).
    2. Ashton, John & Burnett, Tim & Diaz-Rainey, Ivan & Ormosi, Peter, 2021. "Known unknowns: How much financial misconduct is detected and deterred?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    3. Brož, Václav & Kočenda, Evžen, 2022. "Mortgage-related bank penalties and systemic risk among U.S. banks," Journal of International Money and Finance, Elsevier, vol. 122(C).
    4. Lin, Xudong & Zhu, Hao & Meng, Yiqun, 2025. "Financial order matters: The real effect of financial-judicial trials on stock price informativeness," International Review of Financial Analysis, Elsevier, vol. 102(C).
    5. Laure Batz, 2023. "Financial market enforcement in France," European Journal of Law and Economics, Springer, vol. 55(3), pages 409-468, June.

    More about this item

    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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