Criminal Compliance and Financial Institutions: Conformity Effects and Cost Effectiveness

Project Start:01/2017
Researchers:Christoph Burchard, Ercan Cömert, Horst Entorf, Dennis Gram
Category: Financial Intermediation
Funded by:LOEWE

Companies, in particular financial institutions, are affected by an increasing number of regulations (e.g., US Sarbanes-Oxley Act of 2002, US Dodd-Frank Act of 2010) that lead to a permanent threat of severe and costly sanctions. Using textual analysis techniques and annual financial statements of DAX 30 companies, we analyzed whether this development has spurred a change of reporting behavior on compliance in the annual reports of DAX 30 companies. Moreover, we gathered a unique data set, which is based on the Dow Jones Risk & Compliance database and consists of 557 news articles on 55 compliance incidents related to DAX 30 companies. Using this data base, we studied the effect of compliance incidents on the shareholder value of respective companies during the time period 2002 until 2016.