Corporate governance and value preservation: The effect of the FinCEN leak on banks

Joseph Mc Cahery, Paul Pudschedl, Florencio Lopez-de-Silanes

Research output: Contribution to journalArticleScientificpeer-review


We examine the market response to the disclosure of suspicious activity reports (SARs), made public as part of the FinCEN leak. We find a significant negative stock market reaction the days after the database was made public. To further examine the effects of the FinCEN leak, we study whether the fines imposed on US banks will have a negative impact on market valuations. Using a unique dataset, we document a negative market reaction after the event. We find that financial institutions with better governance have fewer regulatory fines and suffer less financial market effects from the announcement of these fines. Furthermore, we find evidence of fewer instances of advance leakage around fine announcements. Finally, our results show that institutional investors diversify holdings away from banks with larger fines.
Original languageEnglish
Pages (from-to)247-298
Number of pages52
JournalLaw and Contemporary Problems
Issue number4
Publication statusPublished - 2022


  • Banks, Government Policy and Regulation, Enforcement, Fin CEN Files


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