Booms, Busts, and Fraud

Povel, Paul; Singh, Rajdeep; Winton, Andrew

doi:10.2139/ssrn.478602

Cited by 83 publications

(83 citation statements)

References 18 publications

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“…This finding gives a first indication that class-action lawsuits are a response to decreasing stock markets. It is also in line with Povel, Singh, and Winton (2007), who stated that managers' incentives to manipulate are largest in boom times because shareholders are less vigilant. After 2002 and the enforcement of the Sarbanes-Oxley Act, a sharp increase occurred in lawsuits related to corporate governance.…”

Section: Methodssupporting

confidence: 82%

Misdeeds Matter: Long-Term Stock Price Performance after the Filing of Class-Action Lawsuits

Bauer

Braun

2010

Financial Analysts Journal

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Section: Methodssupporting

confidence: 82%

Misdeeds Matter: Long-Term Stock Price Performance after the Filing of Class-Action Lawsuits

Bauer

Braun

2010

Financial Analysts Journal

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“…Empirical studies have found that the effect of real economic activity is different between different types of crimes. Property crimes, violence crimes, and sex crimes are countercyclical, while the reverse is true for economic crimes due to increasing opportunity during economic expansions (Bushway et al 2012;Krüger 2011;Povel et al 2007); for example, Detotto and Otranto (2012) have recently found that economic crimes, including bankruptcy frauds, display a sensitivity to macro-economic conditions. Overall, we could expect a negative relationship between changes in bankruptcies and changes in economic growth: bankruptcies increase during economic downturns and recessions and are reduced during economic upturns.…”

Section: Data and Variablesmentioning

confidence: 99%

Destructive entrepreneurship in the small business sector: bankruptcy fraud in Sweden, 1830–2010

2018

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Entrepreneurship will not always productive: Baumol (1990Baumol ( , 1993 distinguishes between productive, unproductive, and destructive entrepreneurial activities, and in the last two cases, new values are not created. Setting of from the notion of destructive entrepreneurship and the bankruptcy institute as framework for the empirical analysis, we use long aggregate series on bankruptcies and bankruptcy frauds in Sweden, 1830-2010. We operationalize destructive entrepreneurship with bankruptcy frauds. The bankruptcy institute is not a pure cleansing mechanism; assets can be redistributed by criminal procedure. Thus, a form of destructive entrepreneurship can be conducted within this system. We link bankruptcy frauds to the selection mechanism-the aggregate bankruptcy volume-over time. We cannot establish any direct linkages between the bankruptcy volume and institutional changes. However, and in line with research on bankruptcy diffusion and diffusion of economic crimes, we find that bankruptcy frauds have significant, positive impacts on the bankruptcy volume. Therefore, our results indicate that increases in bankruptcy frauds, destructive entrepreneurship, would affect the economic system.

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“…For equation (20), we again expect the constant term to be zero. However, because of the private information encompassed by bank ratings, the sum of the coefficients of  21 +  22 should be unity and  22 > 0Using these restrictions, we can rewrite equations (19) and (20) in terms of stationary variables:…”

Section: Modelmentioning

confidence: 99%

“…Based on the model, we expect that the credit bureau's rating will not be able to forecast the bank rating because the information contained in credit bureau ratings is already embedded in the bank rating. In terms of equations (19) and (20),  11 = 0. Because the underlying information follows a random walk, the coefficient on the lagged bank rating should be unity and the constant term should be zero.…”

Section: Hypothesesmentioning

confidence: 99%

“…When forced to curtail lending, they reallocate their loan portfolio towards more creditworthy, more captured borrowers. Povel, Singh and Winton (2007) investigate the relation between the cost of monitoring,and reporting fraud incentives for companies across the business cycle. Their work has implications for how carefully financial institutions should scrutinize firms in which they invest and for the gains from increased informativeness of publicly available information.…”

Section: Introductionmentioning

confidence: 99%

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Credit Ratings and Bank Monitoring Ability

Nakamura

Roszbach

2010

SSRN Journal

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In this paper we use credit rating data from two Swedish banks to elicit evidence on these banks' loan monitoring ability. We do so by comparing the ability of bank ratings to predict loan defaults relative to that of public ratings from the Swedish credit bureau. We test the banks' abilility to forecast the credit bureau's ratings and vice versa. We show that one of the banks has a superior predictive ability relative to the credit bureau. This is evidence that bank credit ratings do contain valuable private information and suggests they may be be a reasonable basis for risk management. However, public ratings are also found to have predictive ability for future bank ratings, indicating that risk analysis should be based on both public and bank ratings. The methods we use represent a new basket of straightforward techniques that enable both financial institutions and regulators to assess the performance of credit ratings systems.

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Booms, Busts, and Fraud

Cited by 83 publications

References 18 publications

Misdeeds Matter: Long-Term Stock Price Performance after the Filing of Class-Action Lawsuits

Misdeeds Matter: Long-Term Stock Price Performance after the Filing of Class-Action Lawsuits

Destructive entrepreneurship in the small business sector: bankruptcy fraud in Sweden, 1830–2010

Credit Ratings and Bank Monitoring Ability

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