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    Discussion of Financial Scandals

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    Hi, I need some assistance constructing 3-4 paragraphs in order to help develop a concept (with some good references) on the following question:
    Question: If a financial institution is caught up in a financial scandal, would you expect its value to fall by more or less than the amount of any fines and settlement payments?

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    Ok, this one is a little complicated. I found an academic article dealing with aspects of this:
    Since it deals with the decline of shareholder wealth, it is very applicable to your question.

    Let's go through it:
    When a scandal hits, lawsuits usually follow (this is natural). Hence, the paper deals with the lawsuits rather than the scandal (but this is not a significant distinction). First of all, the authors claims that the more interlocked firms are, the more disproportionate the effects of the lawsuits. This includes financial losses as well as problems in turnover, reputation, etc. the point is that when the scandal is seen to include interlocked firms (like Enron and AIG), the financial repercussions of the scandal are worse than if it was a company standing alone.

    Secondly, it's also the case that if a board member is part of a class action suit resulting from a scandal (fraud), any other boards that he might be ...

    Solution Summary

    A discussion of financial scandals are discussed. The amount of any fines and settlement payments are determined.