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Financial scandals: a historical overview

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  • Steven Toms

Abstract

I examine the incidence of fraud from c.1720 to 2009 and relate it to the occurrence of significant financial scandals. Focusing on the UK, and US prior to Enron, and using a detailed dataset of significant events and news content, underpinned by examination of specific watershed scandals, the paper highlights the regulatory response to scandals and the implications for accounting and financial reporting. The evidence reveals the incidence of fraud and financial scandal to be historically contingent and skewed towards certain sectors, particularly banking and finance, facilitated by complex group structures and international capital mobility, and mediated by managerial incentives and ownership concentration. Financial reporting and auditing can mitigate fraud opportunities in all sectors and businesses without complex group structures, and the accounting profession achieved some success in this respect up to the mid-1970s. Since then, the profession has been increasingly challenged by, and to some degree implicated in, the development of interconnected and international business networks, which, combined with wider financial deregulation, has led to a resurgence of fraud and financial scandal not previously experienced since the mid-nineteenth century.

Suggested Citation

  • Steven Toms, 2019. "Financial scandals: a historical overview," Accounting and Business Research, Taylor & Francis Journals, vol. 49(5), pages 477-499, July.
    • Handle: RePEc:taf:acctbr:v:49:y:2019:i:5:p:477-499
    DOI: 10.1080/00014788.2019.1610591
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    References listed on IDEAS

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    1. Collins, Michael & Baker, Mae, 2003. "Commercial Banks and Industrial Finance in England and Wales, 1860-1913," OUP Catalogue, Oxford University Press, number 9780199249862, Decembrie.
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    Cited by:

    1. Jonathan A. Batten & Igor LonČarski & Peter G. Szilagyi, 2022. "Financial Market Manipulation, Whistleblowing, and the Common Good: Evidence from the LIBOR Scandal," Abacus, Accounting Foundation, University of Sydney, vol. 58(1), pages 1-23, March.
    2. Saeid Homayoun & Vahid Molla Imeny & Mahdi Salehi & Mahdi Moradi & Simon Norton, 2022. "Which Is More Concerning for Accounting Professionals-Personal Risk or Professional Risk?," Sustainability, MDPI, vol. 14(22), pages 1-13, November.
    3. Ivanka Vranic & Veljko Samardzic & Tatjana Davidov & Zeljko Grubljesic & Slobodan Popovic, 2021. "Significance Of Consideration Of Internal Control And Internal Audit In The Business Of Companies That Need To Implement The Implementation Mentioned Within The Accounting Policy Of The Company," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 3, pages 37-44, June.
    4. Yousaf, Imran & Riaz, Yasir & Goodell, John W, 2023. "What do responses of financial markets to the collapse of FTX say about investor interest in cryptocurrencies? Event-study evidence," Finance Research Letters, Elsevier, vol. 53(C).

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