Listing Standards and Fraud

Cumming, Douglas J.; Johan, Sofia

doi:10.1002/mde.2622

Cited by 32 publications

(15 citation statements)

References 37 publications

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“…Detected fraud rates in China are quite similar to those in the U.S. (Cumming & Johan, 2013). Detected fraud rates in China are quite similar to those in the U.S. (Cumming & Johan, 2013).…”

Section: Page 29 Of 46supporting

confidence: 54%

“…One difficulty of this alternative approach, however, is that fraud firms comprise roughly only 3% to 5% of listed companies each year in both China and the U.S. (Cumming & Johan, 2013). One difficulty of this alternative approach, however, is that fraud firms comprise roughly only 3% to 5% of listed companies each year in both China and the U.S. (Cumming & Johan, 2013).…”

Section: Page 29 Of 46mentioning

confidence: 99%

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Gender Diversity and Securities Fraud

Cumming

Leung

Rui

2015

AMJ

Self Cite

596

336

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We formulate theory on the effect of board of director gender diversity on the broad spectrum of securities fraud and generate three main insights. First, based on ethicality, risk aversion, and diversity, we hypothesize that gender diversity on boards can operate as a significant moderator for the frequency of fraud. Second, we hypothesize that the stock market response to fraud from a more gender-diverse board is significantly less pronounced. Third, we hypothesize that women are more effective in maledominated industries in reducing both the frequency and severity of fraud. Our first-ever empirical tests, based on data from a large sample of Chinese firms that committed securities fraud, are largely consistent with each of these hypotheses. ABSTRACTWe formulate theory on the effect of board of director gender diversity on the broad spectrum of securities fraud and generate three main insights. First, based on ethicality, risk aversion, and diversity, we hypothesize that gender diversity on boards can operate as a significant moderator for the frequency of fraud. Second, we hypothesize that the stock market response to fraud from a more gender-diverse board is significantly less pronounced. Third, we hypothesize that women are more effective in male-dominated industries in reducing both the frequency and severity of fraud.Our first-ever empirical tests, based on data from a large sample of Chinese firms that committed securities fraud, are largely consistent with each of these hypotheses.

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“…Detected fraud rates in China are quite similar to those in the U.S. (Cumming & Johan, 2013). Detected fraud rates in China are quite similar to those in the U.S. (Cumming & Johan, 2013).…”

Section: Page 29 Of 46supporting

confidence: 54%

Section: Page 29 Of 46mentioning

confidence: 99%

Gender Diversity and Securities Fraud

Cumming

Leung

Rui

2015

AMJ

Self Cite

596

336

View full text Add to dashboard Cite

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“…Cumming and Johan (2013) estimated that, on average, 2 to 5% of listed companies in the USA are investigated per year by the SEC 3. "A 1-standard-deviation improvement in trading rule specificity gives rise to a 23.43% reduction in the number of suspected insider trading cases and a 53.17% increase in profits per case.…”

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confidence: 99%

Financial Impact of Regulatory Sanctions on French Listed Companies

Batz

2018

SSRN Journal

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This paper assesses the information content of sanctions of listed companies pronounced by the French Financial Market Authority, through reactions from financial markets over the period 2004 to 2016. We answer whether, for a listed company, being named in a sanction report, as an offender, an acquitted, or a victim of others' financial misconduct conveys information to the market using an eventstudy methodology, complemented with cross-sectional regression analysis: do investors react to such news, and if so, at which stage of the procedure, to what extent, and why? We find that the markets do react accordingly to the information content of the sanctions. Guilty listed companies experience significant negative abnormal returns after both the sanction decision, and its publication (respectively-0.9% and-1.1% from the day preceding the event until 3 days after), though to a limited extent in absolute and relative terms. Some factors will contribute to stronger underperformances such as being investigated, longer procedures, being a smaller company possibly from financial or technological sectors, stronger media coverage of the sanctions, and better economic activity. The markets also incorporate the information content of the decision: no statistically significant abnormal reaction follows the publication of anonymized sanctions; market reactions vary depending on the regulatory breaches, being stronger for third party offenses; and, to some extent, the severity of the decision influences the magnitude of abnormal returns. Settlements do not convey information to the market, being a lighter and shorter procedure, associated with lower sanctions. Being sentenced non-guilty implies a mixed correction on the market, depending on the step of the procedure. Finally, companies named in a sanction report as victims of others' regulatory breaches also suffer negative abnormal returns after the sanction, suggesting double punishment.

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“…The Securities and Exchange Commission (SEC), for example, provides oversight on a range of financial and accounting regulations. Actions related to insider trading and accounting fraud are common and encompass nearly all industries (Cumming and Johan, ; Yu, ). In recent years, an important area of enforcement relates to Foreign Corrupt Practices Act (FCPA).…”

Section: The Lemons Problem: Implications For Mandas and Detection Of Nmentioning

confidence: 99%

Compliance, Detection, and Mergers and Acquisitions

Ghosal

Sokol

2013

Manage Decis Econ

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Firms operate under a wide range of rules and regulations. These include, for example, environmental regulations (in which some industries have increased regulatory exposure) and finance and accounting (where all industries have reporting requirements). In other areas, such as antitrust cartels, enforcement is unregulated, and antitrust leaves the market as the default tool to police against anticompetitive behavior. In all of these areas, detection of noncompliance by a firm can result in significant penalties. This issue of noncompliance has implications in the merger and acquisitions (M&A) context. In a transaction between an acquiring firm (buyer) and a target firm (seller), there is asymmetric information about the target's quality. In our framework, we link a target's quality directly to the strength of its regulatory compliance. In an M&A transaction, an acquirer seeks information about the target's compliance, as a compliance failure may result in substantial penalties and sanctions, post-acquisition. In the presence of quality (compliance) uncertainty about target firms, low-quality targets can masquerade as high quality. This would tend to give rise to an M&A market with Lemons-like characteristics, resulting in low transaction prices and dampening of M&A activity. We examine how M&A transactions in such regulatory areas -environmental, finance and accounting, and antitrust compliance problems -might function to alleviate quality uncertainty.

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Listing Standards and Fraud

Cited by 32 publications

References 37 publications

Gender Diversity and Securities Fraud

Gender Diversity and Securities Fraud

Financial Impact of Regulatory Sanctions on French Listed Companies

Compliance, Detection, and Mergers and Acquisitions

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