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Large losses are a major concern of a firm and represent a special problem for its risk manager. The risk manager's function is to minimize the impact of these losses as part of the overall objective of maximizing the wealth of the owners of the firm. This paper evaluates the behavior of the firm's stock price once a large loss occurs and shows that large losses generally have an impact on the market price of the firm's stock.
Sprecher et al. (Tue,) studied this question.