Three essays on corporate financial misconduct and market reactions.

Summary The thesis consists of three empirical articles on stock market reactions to financial misconduct. The scope of the breaches covers insider trading, price manipulation, breaches relating to financial information and any other breach likely to undermine investor protection. The first two articles exploit a unique database covering all sanction decisions taken by the French Autorité des Marchés Financiers (AMF) since its creation in 2003, using an event study methodology. More specifically, the first paper examines how the French market reacts to the unanticipated announcement of a sanction of a listed company. The results highlight that such decisions by the regulator lead to significant but limited negative abnormal returns. By correcting these abnormal returns for the amount of the fine imposed by the AMF, the largest market capitalizations would benefit from being sanctioned. The second article reverses the perspective by analyzing the repercussions for a listed company of being mentioned as the past victim of sanctioned breaches. The conclusion is that these "avenged victims" suffer a double penalty: when the breach is committed (for example, price manipulation or insider trading) and again when their former tormentor is convicted. The last article broadens the perspective by meta-analyzing the literature on the impact on financial markets of intentional financial misconduct, estimated with an event study. The objective is to put the results of the first article into perspective as well as to fill a gap in the existing literature. The meta-analysis demonstrates that this field of literature is affected by a negative publication bias. Nonetheless, after correcting for this bias, financial failures result in statistically significant negative abnormal returns.