Stock Price Response to Non- and Deferred Prosecution Agreements

Reblogged from CLS Blue Sky Blog

CLS Blue Sky Blog

In response to perceived corporate governance shortcomings in major U.S. corporations, the U.S. Department of Justice, starting in 2002, substantially increased the execution of non- and deferred prosecution agreements (N/DPAs). High profile N/DPAs and plea agreements executed in 2012 and 2014 suggest that the DOJ – not judges or the legislature – through its targeting of certain industries, is effectuating large-scale corporate governance changes. The companies subject to NDPAs are among the largest domestically and worldwide, including Johnson & Johnson, KPMG, HSBC, JPMorgan Chase, Deutsche Bank, ABN Amro Bank, Barclays Bank, Credit Suisse, Fannie Mae, Freddie Mac, General Reinsurance, Lloyds TSB, Metropolitan Life Insurance, UBS, and Wells Fargo. The collective market capitalization of U.S. financial corporations that are subject to NDPAs exceeds $690 billion and exceeds over $20 trillion in assets under management.

The controversy surrounding N/DPAs is bitter and well defined. Because historically corporate governance fell under state law…

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