Reputational risk on corporate corruption scandals: evidence from Latin America

Roby Arbe, José Manuel Feria-Domínguez

Research output: Contribution to journalArticle (Contribution to Journal)peer-review


This paper evaluates how corruption scandals effects corporate reputational risk in main representatives Latin America listed companies. Efficient market hypothesis (EMH) on Standard and Poor’s index is also tried on.

First it is run a standard event study to evaluate the negative impact of such corruption episodes in terms of abnormal returns (ARs) and cumulative negative abnormal returns (CARs). Secondly, we use the operational loss derived from the corruption scandal divided by the stock's market capitalization (Loss Ratio) to estimate the reputational abnormal returns (RepARs) and its cumulative measure (RepCAR).

It is found that corporate reputation (CR) does not affect the stock market performance of the companies involved in the corruptions events, at least, in the very short term. The results show positives RepCARs due to still unknown losses of relative size of corruption after the announcement of the scandal, when the market shows greater sensitiveness.

Practical implications
The behavior of the market on corruption scandals on the Latin American can let explore other options to limit bribery, and the study of this with a perspective of EMH is the significance of this paper.

Social implications
Corruption become major problems in recent years in Latin American and its implications on the stakeholders.

Observing in the existing literature, there is no many studies based on the corruption scandals and market price using event methodology.
Original languageEnglish
Pages (from-to)329-344
Number of pages16
JournalAcademia Revista Latinoamericana de Administración
Issue number3
Early online date25 Apr 2022
StatePublished - 16 Aug 2022


  • Risk premium
  • Stock returns
  • Efficient market hypothesis
  • Event studies
  • Corruption
  • Illegal behavior
  • Illegal behavior
  • Prima de riesgo
  • Estudios de eventos
  • Hipotesis de mercado eficiente
  • Rentabilidad de acciones
  • Corrupcion
  • Comportamiento ilegal


  • Article


Dive into the research topics of 'Reputational risk on corporate corruption scandals: evidence from Latin America'. Together they form a unique fingerprint.

Cite this