THE EFFECT OF OPERATIONAL LOSS EVENTS ON THE REPUTATION OF SOUTH AFRICAN BANKS
Year 2016,
Volume: 8 Issue: 1, 151 - 168, 01.06.2016
S.J. Ferreira
D. Viljoen
G. van Vuuren
Abstract
With few previous data and literature based on the South African banking sector, the key aim of this study was to contribute further results concerning the effect of operational loss events on the reputation of South African banks. The study primarily focused on identifying reputational risk among Regal Treasury Bank, Saambou Bank, Standard Bank and African bank. The events announced by these banks occurred between 2000 and 2014. The results indicated significant cumulative abnormal returns on the announcement day for three of the four banks
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Year 2016,
Volume: 8 Issue: 1, 151 - 168, 01.06.2016
S.J. Ferreira
D. Viljoen
G. van Vuuren
References
- ACE http://www.acegroup.com/globalassets/documents/EuropeCorporate/ThoughtLead ership/ace_reputation_at_risk_july_2013.pdf [Accessed 21.04.2015]
- BCBS. (2001). Consultative document: operational risk. https://www.bis.org/publ/bcbsca07.pdf [Accessed 30.03.2014]
- BCBS. (2011), Principles for the Sound Management of Operational Risk. http://www.bis.org/pub/bcbs195.pdf [Accessed 30.03.2014]
- Chartered Institute for Management Accountants. (2007), Corporate reputation: perspectives of measuring and managing a principle risk. http://www.cimaglobal.com/Documents/Thought_leadership_docs/cid_exrep_cor porate_reputation_june07.pdf[Accessed 21.04.2015]
- Cummings, J.D., Lewis, C.M., & Wei, R. (2004), Market value impact of operational risk events for U.S banks and insurers. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=640061 [Accessed: 5 Jun.
- De Fontnouvelle, P. & Perry, J. (2005), Managing reputational risk. The market reaction to operational loss announcement. Federal Reserve Bank of Boston. (Working paper).
- Dirk, N. (2013), The NCR slaps African Bank with a R20m fine. http://www.justmoney.co.za/loans/news/The-NCR-slaps-African-Bank-with-a
- R20m-fine.aspx?id=99576d5f-e0ea-4c40-bcba-cfc2f3109d2f [Accessed: 4 Jul.
- Fama, E.F. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25(2):383–417.
- Ferreira, S.J. (2014). Analysing reputational risk in the South African Banking sector. Vanderbijlpark: NWU. (Mini-dissertation-unpublished).
- Fiordelisi, F., Soana, M.G. & Schwizer, P. (2014), Reputational losses and operational risk in banking. European journal of Finance, 20(2):105-124.
- Fiordelisi, F., Soana, M.G., & Schwizer, P. (2013). The determinants of reputational risk in the banking sector. Journal of Banking & Finance, (2013):1359-1371.
- Gillet, R., Hubner, G. & Plunus, S. (2010), Operational risk and reputation in the financial industry. Journal of Banking and Finance, 34(10):224-235.
- Gladysek, O. & Chipeta, C. (2012), The Impact of Socially Responsible
- Investment Index. Constitute Announcements on firm price: Evidence from the JSE. SAJEMS, 15(4):429-439. International Association of Risk and Compliance Professionals (2015),
- Reputational risk. http://www.risk-officer.com/Reputational_Risk.htm [Accessed Apr. 2015]
- Jarrow, R.A. (2008), Operational risk. Journal of Banking and Finance, Vol.32 (2008):pp.870-879.
- Khortari, S.P. & Warner, J.B. (2006), The econometrics of event studies. http://www.bu.edu/econ/files/2011/01/KothariWarner2.pdf [Accessed 3.6.2015]
- Kumar, S. Mahadevan, A. & Gunasekar, S. (2012), Market reaction to dividend announcement: an empirical study using event study technique. Prestige
- International Journal of Management & IT- Sanchayan, 1(1):141-153. Lefifi, T.A. (2014), British watchdog’s £7.6m fine puts spotlight on Standard
- Bank’s controls. Business Day, 26 Jan. http://www.bdlive.co.za/business/financial/2014/01/26/british-watchdogs-7.6m- fine-puts-spotlight-on-standard-banks-controls [Accessed 2.10.2014]
- Lewis, N. (2004), Operational risk with Excel and VBA, New Jersey: Wiley.
- Marx, J., De Swart, C. & Erasmus, P. (2009). Financial management in Southern
- Africa. 3rd ed. South Africa: Pearson Education. Micocci, M., Masala, G., Cannas, G. & Flore, G. (2009), Reputational effects of operational risk events for financial institutions. Working Paper, University of
- Cagliari, Cagliari, Italy. Mitra, S., Karathanasopoulos, A., Sermpinis, G., Dunis, C. & Hood, J. (2015),
- Operational risk: Emerging markets, sectors and measurement. European Journal of Operational Research, Vol.24 No.1, pp.122-132. Moses, M. & Rajendran, A (2012), Operational risks involved in banking industries. Amity Global Business Review, 7(1):50-57.
- Ord, T. 2011. Abnormal return definition. http://www.mysmp.com/fundamental-analysis/abnormal-return.html Date of access: 19 Aug. 2015.
- Ross, A. (2005). Report of Economist intelligence unit. Reputation: Risk of risks. http://www.acegroup.com/eu-en/assets/risk-reputation-report.pdf [Accessed 6.2015]
- South Africa. (2013), Levenstein v The State 2013 (12) ZASCA 147 (D).
- Steyn, E., de Beer, A.S., Steyn, D. & Schreiner, W.N. (2004), Enron and Saambou Bank in South Africa: a case study of insufficient relationship management. Public Relations Review, 30(1):75-86.
- Sturm, P. (2013), Operational and reputational risk in the European banking industry: the market reaction to operational events, Journal of Economic
- Behaviour & Organization, Vol. 85, (2013):pp.191-206.
- Sweeting, P. (2011), Financial enterprise risk management, New York:
- Cambridge University Press. Woon, W.S. (2004), Introduction to the event study methodology. http://users.telenet.be/webdesignsite/Bachelorproeven/Bronnen/analyst%20recom mendations/Introduction_to_the_Event_Study_Methodology%5B1%5D.pdf Accessed 3.6.2015]
- Xifra, J. & Ordeix, E. (2009). Managing reputational risk in an economic downturn: The case of Banco Santander. Public Relations Review, 35(9):353
- Zboron, M. (2006). Reputational risk in the context of A.M. best’s rating analysis. The Geneva Papers, 2006(31):500-511.