Corporate Fraud and Business Conditions: Evidence from IPOs

• 成果类型: Article
• 署名作者: Wang, Tracy Yue; Winton, Andrew; Yu, Xiaoyun
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Indiana University System; IU Kelley School of Business; Indiana University Bloomington; Shanghai Jiao Tong University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2010.01615.x
• 发表日期: 2010
• 页码: 2255-2292
• 关键词: compensation; reputation; banking

摘要

We examine how a firm's incentive to commit fraud when going public varies with investor beliefs about industry business conditions. Fraud propensity increases with the level of investor beliefs about industry prospects but decreases when beliefs are extremely high. We find that two mechanisms are at work: monitoring by investors and short-term executive compensation, both of which vary with investor beliefs about industry prospects. We also find that monitoring incentives of investors and underwriters differ. Our results are consistent with models of investor beliefs and corporate fraud, and suggest that regulators and auditors should be vigilant for fraud during booms.