[en] We investigate the monitoring role of the media, its detection and deterrence effects in corporate operational losses. Relying on our theoretical model, we analyze 8,144 loss events from 132 countries between 2008 and 2019. Controlling for factors related to governance, living standards, business cycles, and firm size, we find that press freedom has a significant positive effect both on the frequency and severity of the observed operational losses. An improvement of one standard deviation in press freedom yields around 43% more and 71% higher public losses. Our estimations on hidden losses indicate that the worldwide detection rate of operational losses might be smaller than 53% and 13% in terms of number and value, respectively. Furthermore, in countries with a tightly controlled media, hidden operational risks might be tremendous. We suggest using public databases more carefully, adjusting operational risk models for the reporting bias, and promoting press freedom to improve corporate governance structures.
Disciplines :
Finance
Author, co-author :
BERLINGER, Edina ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Finance (DF) ; Corvinus University of Budapest, Department of Finance, Budapest, Hungary
Lilla Keresztúri, Judit; Corvinus University of Budapest, Department of Finance, Budapest, Hungary
Lublóy, Ágnes; Stockholm School of Economics in Riga, Department of Accounting and Finance, Rīga, Latvia
Vőneki Tamásné, Zsuzsanna; OTP Bank Hungary, Operational Risk Management Department, Budapest, Hungary
External co-authors :
yes
Language :
English
Title :
Press freedom and operational losses: The monitoring role of the media
Publication date :
March 2022
Journal title :
Journal of International Financial Markets, Institutions and Money
National Research Development and Innovation Office Nemzeti Kutatási Fejlesztési és Innovációs Hivatal National Research, Development and Innovation Office
Funding text :
The data for this paper was generated using SAS® OpRisk Global Data. Copyright, SAS Institute Inc. Cary, NC, USA. All Rights Reserved. This research was funded under the TKP2021-NVA program of the National Office for Research, Development, and Innovation. Edina Berlinger thanks funding from National Research, Development and Innovation Office - NKFIH, K-138826.The data for this paper was generated using SAS? OpRisk Global Data. Copyright, SAS Institute Inc. Cary, NC, USA. All Rights Reserved. This research was funded under the TKP2021-NVA program of the National Office for Research, Development, and Innovation. Edina Berlinger thanks funding from National Research, Development and Innovation Office - NKFIH, K-138826.
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