Fraudulent financial reporting and the consequences for employees

• 成果类型: Article
• 署名作者: Choi, Jung Ho; Gipper, Brandon
• 署名单位: Stanford University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101673
• 发表日期: 2024
• 关键词: earnings losses; FIRMS; EMPLOYMENT; RESTATEMENTS; bankruptcy; proxies; gap

摘要

We combine U.S. Census data with SEC enforcement actions to examine employees' ' outcomes, such as wages and turnover, before, during, and after periods of fraudulent financial reporting. We find that fraud firms' ' employees lose about 50% of cumulative annual wages, compared to a matched sample, and the separation rate is much higher after fraud periods. Yet, employment growth at fraud firms is positive during fraud periods; these firms overbuild and hire new, lower- paid employees concurrent with the fraud, unlike firms in distress which tend to contract. When the fraud is revealed, firms shed workers, unwinding this abnormal growth and resulting in most of the negative wage consequences. Wage outcomes are particularly unfavorable in thin labor markets, and lower-wage employees, though unlikely to have perpetrated the fraud, experience more severe wage losses compared to higher-wage employees.