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Fraud recovery and the quality of country governance

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  • Curti, Filippo
  • Mihov, Atanas

Abstract

Using supervisory data from U.S. financial institutions on fraud-related losses in foreign markets, we find that losses in countries with poor governance have lower recovery rates. Our results are robust to accounting for potential endogeneity and reverse causality concerns, among numerous robustness checks. The association is driven by intuitive governance dimensions such as control of corruption, rule of law, regulatory quality and government effectiveness. In addition, country governance plays a particularly important role in fraud recovery for firms with poor risk management quality. Overall, this paper presents unique and novel evidence tying country governance quality to firm-level risk realizations.

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  • Curti, Filippo & Mihov, Atanas, 2018. "Fraud recovery and the quality of country governance," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 446-461.
    • Handle: RePEc:eee:jbfina:v:87:y:2018:i:c:p:446-461
    DOI: 10.1016/j.jbankfin.2017.11.009
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    2. Bashir Ahmad & Maria Ciupac-Ulici & Daniela-Georgeta Beju, 2021. "Economic and Non-Economic Variables Affecting Fraud in European Countries," Risks, MDPI, vol. 9(6), pages 1-17, June.
    3. Faozi A. Almaqtari & Abdulwahid Hashid & Najib H. S. Farhan & Mosab I. Tabash & Waleed M. Al‐ahdal, 2022. "An empirical examination of the impact of country‐level corporate governance on profitability of Indian banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 1912-1932, April.
    4. Wiwik Utami & Lucky Nugroho & Ratna Mappanyuki & Venny Yelvionita, 2020. "Early Warning Fraud Determinants in Banking Industries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(6), pages 604-627, June.
    5. Berger, Allen N. & Curti, Filippo & Mihov, Atanas & Sedunov, John, 2022. "Operational Risk is More Systemic than You Think: Evidence from U.S. Bank Holding Companies," Journal of Banking & Finance, Elsevier, vol. 143(C).
    6. narjess BOUABDALLAH & jamel Eddine HENCHIRI, 2020. "L' impact des mécanismes de gouvernance interne sur le risque opérationnel bancaire," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(1), pages 151-189, June.
    7. Berlinger, Edina & Lilla Keresztúri, Judit & Lublóy, Ágnes & Vőneki Tamásné, Zsuzsanna, 2022. "Press freedom and operational losses: The monitoring role of the media," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Crime; Fraud; Recovery; International markets; Banking; Country institutions; Governance;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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