Financial crime spillovers. Does one gain to be avenged?

This paper examines the spillovers of sanctioned financial regulatory breaches on avenged victims. Listed companies can be the victims of market manipulators (i.e. regulated entities or individuals), which can get sanctioned by regulators. This research enriches the literature on the unintended repercussions of regulation with a novel and complementary perspective on victims in France. Past work typically focused on investigated and/or sanctioned listed companies, as well as on plaintive firms, in a wide range of jurisdictions. The results demonstrate that, on average, victims experience substantial negative abnormal returns after the sanction. Victims are named then shamed by the market, despite being avenged by the regulator. Hence, naming victims in sanctions implies a double punishment of victims, as the firms already suffered during the violation period. It demonstrates a market failure as victims are not properly differentiated from wrongdoers. The markets also incorporate the information content of the decision and of the parties at stake. All in all, those results plead for an anonymization of all victims, to protect from being sanctioned, for naming and shaming market manipulators, as an alternative efficient enforcement tool to sanctions, and for investments in financial education and pedagogy.