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The Walls Have Ears: Local Information Environments and Corporate Fraud

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  • JENS HAGENDORFF
  • NHAN LE
  • DUC DUY NGUYEN

Abstract

This paper shows that a firm's likelihood of committing corporate fraud is affected by the local information environment. We use the density of local bank branch networks as a proxy for the local information environment. We show that denser bank branch networks increase the likelihood of fraud detection, accelerate the detection of fraud, and decrease the fraud propensity of local firms. Our results cannot be explained by the clustering of firms in urban areas, geographic proximity to regulators, or other location effects. Overall, our study identifies a spatial dimension in the detection and prevention of corporate fraud.

Suggested Citation

  • Jens Hagendorff & Nhan Le & Duc Duy Nguyen, 2022. "The Walls Have Ears: Local Information Environments and Corporate Fraud," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2377-2410, December.
    • Handle: RePEc:wly:jmoncb:v:54:y:2022:i:8:p:2377-2410
    DOI: 10.1111/jmcb.12906
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