The consequences to managers for financial misrepresentation

The consequences to managers for financial misrepresentation We track the fortunes of all 2,206 individuals identified as responsible parties for all 788 Securities and Exchange Commission (SEC) and Department of Justice (DOJ) enforcement actions for financial misrepresentation from January 1, 1978 through September 30, 2006. Fully 93% lose their jobs by the end of the regulatory enforcement period. Most are explicitly fired. The likelihood of ouster increases with the cost of the misconduct to shareholders and the quality of the firm's governance. Culpable managers also bear substantial financial losses through restrictions on their future employment, their shareholdings in the firm, and SEC fines. A sizeable minority (28%) face criminal charges and penalties, including jail sentences that average 4.3 years. These results indicate that the individual perpetrators of financial misconduct face significant disciplinary action. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

The consequences to managers for financial misrepresentation

Loading next page...
 
/lp/elsevier/the-consequences-to-managers-for-financial-misrepresentation-RY648fQvDW
Publisher
Elsevier
Copyright
Copyright © 2008 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/j.jfineco.2007.06.003
Publisher site
See Article on Publisher Site

Abstract

We track the fortunes of all 2,206 individuals identified as responsible parties for all 788 Securities and Exchange Commission (SEC) and Department of Justice (DOJ) enforcement actions for financial misrepresentation from January 1, 1978 through September 30, 2006. Fully 93% lose their jobs by the end of the regulatory enforcement period. Most are explicitly fired. The likelihood of ouster increases with the cost of the misconduct to shareholders and the quality of the firm's governance. Culpable managers also bear substantial financial losses through restrictions on their future employment, their shareholdings in the firm, and SEC fines. A sizeable minority (28%) face criminal charges and penalties, including jail sentences that average 4.3 years. These results indicate that the individual perpetrators of financial misconduct face significant disciplinary action.

Journal

Journal of Financial EconomicsElsevier

Published: May 1, 2008

References

  • The determinants of corporate board size and composition: an empirical analysis
    Boone, A.L.; Field, L.C.; Karpoff, J.M.; Raheja, C.G.
  • Firm failure and managerial labor markets: evidence from Texas banking
    Cannella, A.A.; Fraser, D.R.; Lee, D.S.
  • Financial fraud, director reputation, and shareholder wealth
    Fich, E.M.; Shivdasani, A.
  • What works in securities laws?
    LaPorta, R.; Lopez-de-Silanes, F.; Shleifer, A.
  • Fight or flight: managing stigma in executive careers
    Semadeni, M.B.; Cannella, A.A.; Fraser, D.R.; Lee, D.S.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off