Impact on the Firm Value of Financial Institutions From Penalties for Violating Anti-Money Laundering and Economic Sanctions

Abstract: This research uses an event study to examine the impact on firm value of U.S. financial institutions as a result of receiving an enforcement action for violations of anti-money laundering (AML) regulations or the Office of Foreign Assets Control (OFAC) economic sanction regulations. There are 989 enforcement actions that are hand-collected in the period from January 2000 to November 2018. The final sample includes 8,948 firm-quarterly observations representing 157 publicly traded financial institutions. The proxy for firm value is the Tobin’s Q ratio. The results demonstrate a negative impact on firm value by the civil money penalties (CMP) issued by regulators or agencies of the federal government. The findings are robust and statistically significant with three CMP proxies controlling for firm size, net interest margin, market return, Tier 1 capital, debt, dividend yield, credit loss ratio, non-performing loans, and provision for loan losses.

Dissertation Discovery Company and Jacksonville University are dedicated to making scholarly works more discoverable and accessible throughout the world. This dissertation, Impact on the Firm Value of Financial Institutions From Penalties for Violating Anti-Money Laundering and Economic Sanctions by Kathleen Donnelly Gowin, was obtained from Jacksonville University and is being sold with permission from the author. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation.