دانلود رایگان مقاله انگلیسی مجازات های مالی و عملکرد بانک - الزویر 2017

Abstract

This paper investigates the impact of financial penalties on the profitability and stock performance of banks. Using a unique dataset of 671 financial penalties imposed on 68 international listed banks over the period 2007 to 2014, we find a negative relation between financial penalties and pre-tax profitability but no relation with after-tax profitability. This result is explained by tax savings, as banks are allowed to deduct specific financial penalties from their taxable income. Moreover, our empirical analysis of the stock performance shows a positive relation between financial penalties and buy-and-hold returns, indicating that investors are pleased that cases are closed, that the banks successfully manage the consequences of misconduct, and that the financial penalties imposed are smaller than the accrued economic gains from the banks’ misconduct. This argument is supported by the positive abnormal returns, which we detected on the announcement of a financial penalty.

5. Conclusion

This study investigates the relationship between financial penalties and banks’ profitability and stock performance. More specifically, in the first part of our study, we analyze the connection between the return on average assets, pre-tax as well as after-tax, and financial penalties. In the second part of our study, we examine the stock market performance of banks facing financial penalties. To that end, we consider the one-year buy-and-hold return and abnormal returns. We use a unique dataset containing hand-collected information on the amount, the type, and the date of each financial penalty imposed on the banks included in our sample. This dataset includes 671 financial penalties paid by 68 international banks between 2007 and 2014.

Our analyses provide evidence of a significant negative relation between financial penalties and the pre-tax profitability of banks. However, banks can – depending on national tax laws, the judicial system, and the type of misconduct – deduct some financial penalties from their taxable earnings. Especially in the case of the US banks examined here, we observe that the relation between financial penalties and profitability described above changes dramatically when after-tax profitability is considered. In contrast, profitability of the European banks is still significantly related to financial penalties. Also, we find evidence that financial penalties are negatively related to profitability in the following year due to a lower income-to-total-assets ratio.