Executives' off-the-job behavior, corporate culture, and financial reporting risk

• 成果类型: Article
• 署名作者: Davidson, Robert; Dey, Aiyesha; Smith, Abbie
• 署名单位: Georgetown University; University of Minnesota System; University of Minnesota Twin Cities; University of Chicago
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.07.004
• 发表日期: 2015
• 页码: 5-28
• 关键词: Executive frugality; Legal infractions; Financial reporting risk; Corporate culture

摘要

We examine how executives' behavior outside the workplace, as measured by their ownership of luxury goods (low frugality) and prior legal infractions, is related to financial reporting risk. We predict and find that chief executive officers (CEOs) and chief financial officers (CFOs) with a legal record are more likely to perpetrate fraud. In contrast, we do not find a relation between executives' frugality and the propensity to perpetrate fraud. However, as predicted, we find that unfrugal CEOs oversee a relatively loose control environment characterized by relatively high and increasing probabilities of other insiders perpetrating fraud and unintentional material reporting errors during their tenure. Further, cultural changes associated with an increase in fraud risk are more likely during unfrugal (vs. frugal) CEOs' reigns, including the appointment of an unfrugal CFO, an increase in executives' equity-based incentives to misreport, and a decline in measures of board monitoring intensity. (C) 2013 Elsevier B.V. All rights reserved.