Tax avoidance and financial crimes in the Netherlands: The effect of the FinCEN leak on banks

Financial crimes have been an increasing concern to regulators but arguably a greater concern to shareholders of banks. We exploit a media leak of suspicious activity reports (SARs), as part of the FinCEN files, to examine the market value of banks. We find that the market reacted negatively to Dutch financial institutions with exposure to the leak. Moreover, we find significant abnormal returns within the time span between September 19 to September 22. Over the longer horizon, we document that the leak had little impact on shareholder value. Our findings support the view that the stock market drop following the FinCEN leak is largely due to regulatory penalties for past activities or potential litigation risk.