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Financial misconduct and employee mistreatment: Evidence from wage theft

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  • Aneesh Raghunandan

    (London School of Economics)

Abstract

I examine the relation between firms’ financial conduct and wage theft. Wage theft represents the single largest form of theft committed in the United States and primarily affects firms’ most vulnerable employees. I show that wage theft is more prevalent (i) when firms just meet or beat earnings targets and (ii) when executives’ personal liability for wage theft decreases. Wage theft precedes financial misconduct while the theft is undetected, but once firms are caught engaging in wage theft they are more likely to shift to engaging in financial misconduct. My findings highlight an economically meaningful yet previously undocumented way in which firms’ financial incentives relate to employee treatment.

Suggested Citation

  • Aneesh Raghunandan, 2021. "Financial misconduct and employee mistreatment: Evidence from wage theft," Review of Accounting Studies, Springer, vol. 26(3), pages 867-905, September.
    • Handle: RePEc:spr:reaccs:v:26:y:2021:i:3:d:10.1007_s11142-021-09602-y
    DOI: 10.1007/s11142-021-09602-y
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    More about this item

    Keywords

    Wage theft; Real earnings management; Financial misconduct; Labor practices;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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