Reputational damage of operational loss on the bond market: Evidence from the financial industry

► Operational losses have a reputational impact on bond prices of financial companies. ► Bond returns might be affected by an operational loss at up to three points in time. ► The knowledge of the real loss amount tends to hinder the negative market reaction. ► Debtholders tend to penalize harder the involuntary weakness of the firms. ► The bond market seems to react consistently with the size of loss.