Operational Risk and Reputation in Financial Institutions: Does Media Tone Make a Difference?
  • Room 401, Cookworthy Building

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iSPER MIC research group seminar with Dr Simon Ashby, Associate Professor in Financial Services, Plymouth Business School.

Operational risk announcements are unexpected adverse media news supposedly harming the reputation of financial institutions. 

This paper examines the equity-based and debt-based reputational effects of financial sentiment tones in operational risk announcements and shows how such reputational effects are moderated by alternative sources of public information. Our analysis reveals that the net negative tone and litigious tone have adverse reputational effects and the uncertainty tone mitigates the adverse reputational impact. Additionally, alternative, simultaneous sources of information neutralise the reputational effects of textual tones. First, loss amount disclosure dissolves the favourable (adverse) reputational effects of the uncertainty tone (litigious tone) whilst regulatory announcements counteract the favourable (adverse) reputational consequences of the uncertainty tone (litigious tone). Moreover, by resolving most of the ambiguity underlying the operational risk event, final settlements remove, if not reverse, the favourable reputational impact of the uncertainty tone. Overall, our findings indicate that the reputational effects of the media materialise most when there is lack of certain, regulated public information about the operational risk event.

This seminar is aimed at University of Plymouth academic staff and postgraduate research students. Booking is not required but please contact FoBresearch@plymouth.ac.uk if you have any questions.

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