Abstract
We examine the impact of the enforcement of financial regulations by the French Financial Market Authority on sanctioned firms. The early stages of the enforcement process are by law confidential, with an internal investigation and bilateral exchanges between the defendant and its regulator.
The public hearing by the Enforcement Committee leads to a single publication of the decision, being the only public communication. Using an event study methodology, we find that the confidentiality of the initial steps of enforcement procedures is respected and that markets account for the publication of sanctions.
Still, reactions are limited in absolute and relative terms, both compared to past studies and in terms of reputational penalty. Some parameters trigger a stronger reaction, but not the most straightforward (such as the cash fine or behavioral sanction).
The results echo the reputation for leniency of sanctions (scarce procedures, lax verdicts, low fines, ending neglected by analysts and investors), despite consecutive regulatory tightenings and long procedures. They question the efficiency of enforcement.