Abstract
This paper presents an event study analysis of the market value impact of operational risk events on non-announcing firms in the U.S. banking and insurance industries. We seek evidence of positive or negative intra or inter-sector spillover effects on stock prices in the commercial banking, investment banking, and insurance industries. The rationale for anticipating inter-sector spillovers is the integration of the previously fragmented markets for financial services that has occurred over the past twenty-five years. We find that operational risk events cause significant negative intra and inter-sector spillover effects. Regression analysis reveals that the spillovers are information-based rather than purely contagious.
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