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Does The Stock Market Punish Corporate Malfeasance? A Case Study of Citigroup

Author

Listed:
  • Bruce Mizrach

    (Rutgers University)

  • Susan Zhang Weerts

    (Rutgers University)

Abstract

This paper examines how well the market anticipates regulatory sanction. We look at key dates of SEC, NASD, FTC, Congressional and foreign investigations and their subsequent resolution. Our event study confirms that the settlements provide little new information to the market. In six major case groupings, we find highly accurate predictions from market capitalization changes of settlements and associated private litigation.

Suggested Citation

  • Bruce Mizrach & Susan Zhang Weerts, 2006. "Does The Stock Market Punish Corporate Malfeasance? A Case Study of Citigroup," Departmental Working Papers 200601, Rutgers University, Department of Economics.
    • Handle: RePEc:rut:rutres:200601
    as

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    File URL: http://www.sas.rutgers.edu/virtual/snde/wp/2006-01.pdf
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    References listed on IDEAS

    as
    1. Karpoff, Jonathan M & Lott, John R, Jr, 1999. "On the Determinants and Importance of Punitive Damage Awards," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 527-573, April.
    2. Paul A. Griffin & Joseph A. Grundfest & Michael A. Perino, 2004. "Stock Price Response to News of Securities Fraud Litigation: An Analysis of Sequential and Conditional Information," Abacus, Accounting Foundation, University of Sydney, vol. 40(1), pages 21-48, February.
    3. David W. Prince & Paul H. Rubin, 2002. "The Effects of Product Liability Litigation on the Value of Firms," American Law and Economics Review, American Law and Economics Association, vol. 4(1), pages 44-87, January.
    4. Steven Garber & John Adams, 1998. "Product and Stock Market Responses to Automotive Prodct Liability Verdicts," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998 Micr), pages 1-53.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    SEC; subpoena; probe; settlement; event study;
    All these keywords.

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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    This paper has been announced in the following NEP Reports:

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