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  • Thumbnail for Banking Scandals and Long-Term Stock Price – An Event Study
    Banking Scandals and Long-Term Stock Price – An Event Study by Reohr, James

    This study aims to identify the effects of American bank scandal penalties on long-term stock price utilizing the Fama-French three-factor model and an event study methodology. We hypothesize that bank penalties have a profoundly negative role on long-term bank stock prices. We examine 145 penalties over 4,526 trading days for the ‘Too Big to Fail’ American banks JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America. Adjusted closing price stock data and penalty data is drawn from an 18-year period spanning from 2000-2017. In the long-run, penalties were found to have no statistically significant impact on stock price, implying that ‘Too Big to Fail’ fail banks enjoy market capitalization benefits from their government designation.