Proxies and Databases in Financial Misconduct Research

Karpoff, Jonathan M.; Koester, Allison

doi:10.2139/ssrn.2811778

Cited by 60 publications

(122 citation statements)

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“…Karpoff et al. () argue that each of these four databases has potential issues that may lead to meaningful biases. They also present a detailed discussion of the KKLM database.…”

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confidence: 99%

The impact of corporate fraud on director‐interlocked firms: Evidence from bank loans

Lai¹,

Lei

Song

2018

Business Fin & Account

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We examine the impact of corporate fraud committed by one firm (the “fraudulent firm”) on other firms with interlocking directors (the “interlocked firms”), focusing on the debtholder side. We argue that the revelation of a fraudulent firm's fraud can damage the reputation of the interlocked firms because corporate governance can propagate via director interlocks. Empirically, we find that the interlocked firms' cost of debt is higher and the loan covenants become stricter after the fraud cases of the fraudulent firms are revealed. Consistent with the corporate governance propagation explanation, our results are weaker (stronger) for interlocked firms that have better (worse) pre‐event corporate governance standards. Our findings suggest that corporate fraud of fraudulent firms can affect other firms through director‐interlocks beyond shareholder value.

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“…Karpoff et al. () argue that each of these four databases has potential issues that may lead to meaningful biases. They also present a detailed discussion of the KKLM database.…”

mentioning

confidence: 99%

The impact of corporate fraud on director‐interlocked firms: Evidence from bank loans

Lai¹,

Lei

Song

2018

Business Fin & Account

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“…We obtain a list of federal enforcement actions for financial misrepresentation (henceforth, fraud cases) from the Federal Securities Regulation (FSR) database, compiled by Jonathan Karpoff, Scott Lee, and Gerald Martin (Karpoff, Lee, and Martin ()). The FSR database is the most comprehensive database of federal securities enforcement actions brought about by the SEC and/or the Department of Justice (DOJ).…”

Section: Data Sources and Main Variables Of Interestmentioning

confidence: 99%

Corporate Scandals and Household Stock Market Participation

Giannetti

Wang²

2016

The Journal of Finance

320

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We show that after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease holdings in fraudulent as well as non fraudulent firms, even if they do not hold stocks in fraudulent firms. Within a state, households with more lifetime experience of corporate fraud hold less equity. Following the exogenous increase in fraud revelation due to Arthur Andersen's demise, states with more Arthur Andersen clients experience a larger decrease in stock market participation. We provide evidence that the documented effect is likely to reflect a loss of trust in the stock market. This article is protected by copyright. All rights reserved. 1 JEL classification: G30, D12, D14 6 channels through which fraud revelation may affect stock market participation. Section IV provides evidence on the relevance of trust. Section V concludes and discusses implications of the results for corporate finance.

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“…Karpoff et al (2013) refer to this phenomenon as the 'late initial revelation dates'. Hence, it is difficult to capture the time-series dimension of fraud in a panel data set, and more importantly, an unknown percentage of fraud occurrences remain undetected and unobservable to the researcher.…”

Section: Sample -Identifying Fraud Firmsmentioning

confidence: 99%

“…Researchers have found various ways to identify and observe instances of financial statement fraud, for example, using account restatements (Ahmed and Goodwin, 2007; and international databases such as Government Audit Office; Audit Analytics), securities class actions (Chapple et al, 2014; and international databases such as Stanford's Securities Class Action Clearing House), Australian Securities and Investments Commission (ASIC) actions (Da Silva Rosa et al, 2008) and the SEC's Accounting and Audit Enforcement Releases (AAERs) (Karpoff et al, 2013). However, it is much more difficult to identify and measure misappropriation-type fraud.…”

Section: Introductionmentioning

confidence: 99%

Corporate fraud culture: Re‐examining the corporate governance and performance relation

Tan

Chapple

Walsh

2015

Accounting & Finance

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We analyse the corporate governance and performance relation, when conditioning on corporate fraud, for fraud firms during 2000 -2007. Fraud firms are identified as either self-reported fraud events, or subject to regulatory investigation. We use the inverse Mills ratio procedure to account for firms' (unobservable) fraud culture in the dynamic system GMM model of the performance-governance relation. We find that corporate governance is an endogenously determined characteristic that has no causal impact on firm performance when conditioning on fraud. Fraud is a significant regulatory event but its overall economic impact at the firm level is highly variable.

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Proxies and Databases in Financial Misconduct Research

Cited by 60 publications

References 0 publications

The impact of corporate fraud on director‐interlocked firms: Evidence from bank loans

The impact of corporate fraud on director‐interlocked firms: Evidence from bank loans

Corporate Scandals and Household Stock Market Participation

Corporate fraud culture: Re‐examining the corporate governance and performance relation

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