A Critical Analysis of Databases used in Financial Misconduct Research

Gender Diversity and Securities Fraud

“…We refer to and study the consequences of committing fraud in terms of abnormal share price reaction, as this is the most common and widely accepted method of studying the severity of corporate fraud (Campbell, Lo, & MacKinlay, 1997;Karpoff et al, 2012). We refer to and study the consequences of committing fraud in terms of abnormal share price reaction, as this is the most common and widely accepted method of studying the severity of corporate fraud (Campbell, Lo, & MacKinlay, 1997;Karpoff et al, 2012).…”

“…In the U.S., Karpoff et al (2012), among others, show that there are pronounced long-term consequences for committing fraud, particularly in terms of lost reputation, as shown by lower share prices. In the U.S., Karpoff et al (2012), among others, show that there are pronounced long-term consequences for committing fraud, particularly in terms of lost reputation, as shown by lower share prices.…”

Troublesome Tidings? Investors’ Response to a Wells Notice

“…For example, informed investors might respond negatively to the increased use of income-increasing accounting choices several years before a formal restatement (Ettredge, Scholz, Smith, & Sun, 2010), which could prompt an (undisclosed) Wells notice. Karpoff, Koester, Lee, and Martin (2014) provide further evidence of understatement and document that the most commonly-used data sources of events relating to misconduct (Securities Class Action Clearing House, SEC's AAER series on securities litigation, Government Accountability Office, and Audit Analytics on restatements) capture only a small portion of the price effects of the misconduct, as the databases ignore much relevant precursory information, including Wells notices; although Karpoff et al (2014) [2004][2005][2006] and report a cumulative mean market-adjusted excess return of -3.3 percent over days -1 to 1. These studies, therefore, suggest a negative response to the first-time disclosure of approximately three percent.…”

Regulatory Capture of Regulators: The Case of the Investment Dealers Association of Canada

“…Third, the study of financial crimes presents many database challenges for researchers in the field (Karpoff, Koester, Scott, & Martin, 2004). Chief among these challenges is that the financial crime database only collects recorded events of enforcement outcomes; in other words, the actions (and not the inactions) taken by regulatory bodies (Lokanan, 2017).…”

“…The topic of regulatory capture is important, and the collection of a high-granularity database on penalty cases is highly valuable. In collating and calibrating the data from the cases, the paper adds to the existing literature by providing insights on how to use and analyse data from a complicated database to facilitate research on financial misconduct (Ali, Klasa, & Yeung, 2009;Elton, Gruber, & Blake, 2001;Gillan, Hartzell, Koch, & Starks, 2013;Harris, Jenkinson, Kaplan, & Stucke, 2014;Karpoff et al, 2004). In this sense, the paper displays some valuable, and clearly time-consuming, data collection to produce new insights on regulatory capture and the concrete and theoretically-founded dimension along which the data is analysed.…”