A Theory of Corporate Scandals: Why the USA and Europe Differ
AbstractA wave of financial irregularity in the USA in 2001--2 culminated in the Sarbanes--Oxley Act. A worldwide stockmarket bubble burst over this same period, with the actual market decline being proportionately more severe in Europe. Yet, no corresponding wave of financial scandals involving a similar level of companies occurred in Europe. Given the higher level of public and private enforcement in the USA for securities fraud, this contrast seems perplexing. This paper submits that different kinds of scandals characterize different systems of corporate governance. In particular, dispersed ownership systems of governance are prone to the forms of earnings management that erupted in the USA, but concentrated ownership systems are much less vulnerable. Instead, the characteristic scandal in such systems is the appropriation of private benefits of control. This paper suggests that this difference in the likely source of, and motive for, financial misconduct has implications both for the utility of gatekeepers as reputational intermediaries and for design of legal controls to protect public shareholders. The difficulty in achieving auditor independence in a corporation with a controlling shareholder may also imply that minority shareholders in concentrated ownership economies should directly select their own gatekeepers. Copyright 2005, Oxford University Press.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Review of Economic Policy.
Volume (Year): 21 (2005)
Issue (Month): 2 (Summer)
Contact details of provider:
Web page: http://oxrep.oupjournals.org/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Elvio Accinelli & Laura Policardo & Edgar J. Sánchez Carrera, 2012. "On the Dynamics and Effects of Corruption on Environmental Protection," Documentos de Trabajo (working papers) 1312, Department of Economics - dECON.
- Tomáš Buus, 2008. "Performance of Quoted and Non-quoted Companies in the Europe," European Financial and Accounting Journal, University of Economics, Prague, vol. 2008(4), pages 45-69.
- Jackie Krafft & Yiping Qu & Jacques-Laurent Ravix, 2008. "Corporate governance, industry dynamics and firms performance on the stock market," Post-Print hal-00203544, HAL.
- Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2012.
"Firm Corruption in the Presence of an Auditor,"
Working Paper Series
20_12, The Rimini Centre for Economic Analysis.
- Dietrich, Michael & McHardy, Jolian & Sharma, Abhijit, 2010. "Firm corruption in the presence of an auditor," MPRA Paper 24784, University Library of Munich, Germany.
- Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2010. "Firm corruption in the presence of an auditor," Working Papers 2010016, The University of Sheffield, Department of Economics, revised Jul 2010.
- Tim Bush & Shyam Sunder & Stella Fearnley, 2007. "Auditor Liability Reforms in the UK and the US: A Comparative Review," Yale School of Management Working Papers amz2575, Yale School of Management.
- Rustam, Sehrish & Rashid, Kashif & Zaman, Khalid, 2013. "The relationship between audit committees, compensation incentives and corporate audit fees in Pakistan," Economic Modelling, Elsevier, vol. 31(C), pages 697-716.
- Chilosi, Alberto & Damiani, Mirella, 2007. "Stakeholders vs. shareholders in corporate governance," MPRA Paper 2334, University Library of Munich, Germany.
- Jackie Krafft & Yiping Qu & Jacques-Laurent Ravix, 2011. "Gouvernance d'entreprise et performances sectorielles: une réévaluation de la fiabilité des scores et des mesures de bonne gouvernance," Post-Print hal-00493371, HAL.
- Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2013.
"Corporate governance, value and performance of firms: New empirical results on convergence from a large international database,"
- Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2013. "Corporate governance, value and performance of firms: New empirical results on convergence from a large international database," Post-Print hal-00786664, HAL.
- A. Greenfield & Carolyn Norman & Benson Wier, 2008. "The Effect of Ethical Orientation and Professional Commitment on Earnings Management Behavior," Journal of Business Ethics, Springer, vol. 83(3), pages 419-434, December.
- Shamsul Nahar Abdullah & Nor Zalina Mohamad Yusof & Mohamad Naimi Mohamad Nor, 2010. "Financial restatements and corporate governance among Malaysian listed companies," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(6), pages 526-552, July.
- repec:hal:wpaper:hal-00786664 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.