Reputational risk and financial perception of corporate corruption scandals: evidence from Latin America

In recent years in Latin America, corruption cases have affected corporate reputation, and reputational risk has become a major problem in corporate studies. The objective of the project is to evaluate the impact on the corporate reputation faced by construction companies in Latin America and their listed values ¿¿in the Latin American Integrated Market (MILA), considering recent cases of corruption. For this purpose, the methodology of daily events studies will be applied to evaluate the financial perceptions caused by episodes of corruption between 2008 and 2018, and their effect on the decline in the market value of the companies analyzed. The event study methodology is based on the conditions of the efficient market theory (Fama, 1970) to show abnormal returns as a result of this unusual event; in our case, corruption. We are looking for a significant positive or negative impact on the share prices of the analyzed companies, but also significant cumulative negative abnormal returns (CAR) around the corruption episode.

The event study methodology is based on the conditions of the Efficient Market Theory (Fama, 1970) to show abnormal returns as a result of this unusual event, in our case, corruption.

We are looking for a significant positive or negative impact on the prices of the shares of the companies analyzed around the corruption episode.