Corporate fraud culture: Re‐examining the corporate governance and performance relation. (6th July 2015)

• Record Type: Journal Article
• Authors: Tan, David T.; Chapple, Larelle; Walsh, Kathleen D.
• Is Part Of: Accounting and finance. Volume 57:Number 2(2017)
• Page Start: 597
• Page End: 620
• Publication Date: 2015-07-06
• Subjects: Fraud -- Corporate governance -- Endogeneity; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12156
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: 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.