IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v120y2014i2p251-274.html
   My bibliography  Save this article

The Anatomy of Corporate Fraud: A Comparative Analysis of High Profile American and European Corporate Scandals

Author

Listed:
  • Bahram Soltani

Abstract

This paper presents a comparative analysis of three American (Enron, WorldCom and HealthSouth) and three European (Parmalat, Royal Ahold and Vivendi Universal) corporate failures. The first part of the analysis is based on a theoretical framework including six areas of ethical climate; tone at the top; bubble economy and market pressure; fraudulent financial reporting; accountability, control, auditing, and governance; and management compensation. The second and third parts consider the analysis of these cases from fraud perspective and in terms of firm-specific characteristics (ownership structure) and environmental context (coverage in media and academic literature, regulatory and corporate governance frameworks). The research analyses shed light on the fact that, despite major differences between Europe and U.S. in terms of political institutions, laws and regulations as well as managerial practices, there are significant similarities between six groups. The analysis also demonstrates that, the ethical dilemma has been coupled with ineffective boards, inefficient corporate governance and control mechanisms, distorted incentive schemes, accounting irregularities, failure of auditors, dominant CEOs, dysfunctional management behavior and the lack of a sound ethical tone at the top. Significant similarities were also observed in the analysis from the fraud triangle perspective. However, there are several major differences between the six corporate failure cases particularly with regard to ownership structure, coverage in media, and legal, regulatory and governance frameworks. This research study may have several academic and practical contributions, particularly because of multidisciplinary, international features, and comparative analyses used in the paper. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Bahram Soltani, 2014. "The Anatomy of Corporate Fraud: A Comparative Analysis of High Profile American and European Corporate Scandals," Journal of Business Ethics, Springer, vol. 120(2), pages 251-274, March.
  • Handle: RePEc:kap:jbuset:v:120:y:2014:i:2:p:251-274
    DOI: 10.1007/s10551-013-1660-z
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10551-013-1660-z
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10551-013-1660-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. M. Todd Royle & Angela T. Hall, 2012. "THE RELATIONSHIP BETWEEN McCLELLAND’S THEORY OF NEEDS, FEELING INDIVIDUALLY ACCOUNTABLE, AND INFORMAL ACCOUNTABILITY FOR OTHERS," International Journal of Management and Marketing Research, The Institute for Business and Finance Research, vol. 5(1), pages 21-42.
    2. de Jong, A. & DeJong, D.V. & Mertens, G.M.H. & Roosenboom, P.G.J., 2005. "Royal Ahold : A Failure of Corporate Governance and an Accounting Scandal," Discussion Paper 2005-57, Tilburg University, Center for Economic Research.
    3. Jeffrey Cohen & Yuan Ding & Cédric Lesage & Hervé Stolowy, 2010. "Corporate Fraud and Managers’ Behavior: Evidence from the Press," Journal of Business Ethics, Springer, vol. 95(2), pages 271-315, September.
    4. Lora Reed & Deborah Vidaver-Cohen & Scott Colwell, 2011. "Erratum to: A New Scale to Measure Executive Servant Leadership: Development, Analysis, and Implications for Research," Journal of Business Ethics, Springer, vol. 101(3), pages 507-508, July.
    5. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    6. Moriarty, Jeffrey, 2009. "How Much Compensation Can CEOs Permissibly Accept?," Business Ethics Quarterly, Cambridge University Press, vol. 19(2), pages 235-250, April.
    7. Coffee, John C., Jr., 2007. "Law and the Market: The Impact of Enforcement," Working Papers 07-3, University of Pennsylvania, Wharton School, Weiss Center.
    8. James Angel & Douglas McCabe, 2008. "The Ethics of Managerial Compensation: The Case of Executive Stock Options," Journal of Business Ethics, Springer, vol. 78(1), pages 225-235, March.
    9. Yuhyung Shin, 2012. "CEO Ethical Leadership, Ethical Climate, Climate Strength, and Collective Organizational Citizenship Behavior," Journal of Business Ethics, Springer, vol. 108(3), pages 299-312, July.
    10. Graham, Jill W., 1995. "Leadership, Moral Development, and Citizenship Behavior," Business Ethics Quarterly, Cambridge University Press, vol. 5(1), pages 43-54, January.
    11. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, May.
    12. Muel Kaptein, 2010. "The Ethics of Organizations: A Longitudinal Study of the U.S. Working Population," Journal of Business Ethics, Springer, vol. 92(4), pages 601-618, April.
    13. Robert Jones & Yan Wu, 2010. "Executive compensation, earnings management and shareholder litigation," Review of Quantitative Finance and Accounting, Springer, vol. 35(1), pages 1-20, July.
    14. Brown, Michael E. & Trevino, Linda K. & Harrison, David A., 2005. "Ethical leadership: A social learning perspective for construct development and testing," Organizational Behavior and Human Decision Processes, Elsevier, vol. 97(2), pages 117-134, July.
    15. repec:ibf:ijmmre:v:5:y:2012:i:2:p:21-42 is not listed on IDEAS
    16. Mojca Duh & Jernej Belak & Borut Milfelner, 2010. "Core Values, Culture and Ethical Climate as Constitutional Elements of Ethical Behaviour: Exploring Differences Between Family and Non-Family Enterprises," Journal of Business Ethics, Springer, vol. 97(3), pages 473-489, December.
    17. de Jong, A. & DeJong, D.V. & Mertens, G.M.H. & Roosenboom, P.G.J., 2005. "Royal Ahold: A Failure Of Corporate Governance," ERIM Report Series Research in Management ERS-2005-002-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    18. Edwin Micewski & Carmelita Troy, 2007. "Business Ethics – Deontologically Revisited," Journal of Business Ethics, Springer, vol. 72(1), pages 17-25, April.
    19. de Jong, A. & DeJong, D.V. & Mertens, G.M.H. & Roosenboom, P.G.J., 2005. "Royal Ahold : A Failure of Corporate Governance and an Accounting Scandal," Other publications TiSEM 30cd2011-e035-4e4a-a639-0, Tilburg University, School of Economics and Management.
    20. Lora Reed & Deborah Vidaver-Cohen & Scott Colwell, 2011. "A New Scale to Measure Executive Servant Leadership: Development, Analysis, and Implications for Research," Journal of Business Ethics, Springer, vol. 101(3), pages 415-434, July.
    21. O. Ferrell & Linda Ferrell, 2011. "The Responsibility and Accountability of CEOs: The Last Interview with Ken Lay," Journal of Business Ethics, Springer, vol. 100(2), pages 209-219, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dirk Dierendonck & Kathleen Patterson, 2015. "Compassionate Love as a Cornerstone of Servant Leadership: An Integration of Previous Theorizing and Research," Journal of Business Ethics, Springer, vol. 128(1), pages 119-131, April.
    2. Rebecca VanMeter & Lawrence B. Chonko & Douglas B. Grisaffe & Emily A. Goad, 2016. "In search of clarity on servant leadership: domain specification and reconceptualization," AMS Review, Springer;Academy of Marketing Science, vol. 6(1), pages 59-78, June.
    3. Martin Mutschmann & Tim Hasso & Matthias Pelster, 2022. "Dark Triad Managerial Personality and Financial Reporting Manipulation," Journal of Business Ethics, Springer, vol. 181(3), pages 763-788, December.
    4. Vēvere Velga & Liniņa Iveta, 2016. "Ethical Leadership: Meaning and Measurement. Latvian Retail Traders’ Perspective," Economics and Culture, Sciendo, vol. 13(2), pages 89-96, December.
    5. Farida Saleem & Yingying Zhang Zhang & C. Gopinath & Ahmad Adeel, 2020. "Impact of Servant Leadership on Performance: The Mediating Role of Affective and Cognitive Trust," SAGE Open, , vol. 10(1), pages 21582440199, January.
    6. Jorge Linuesa-Langreo & Pablo Ruiz-Palomino & Dioni Elche-Hortelano, 2018. "Integrating Servant Leadership into Managerial Strategy to Build Group Social Capital: The Mediating Role of Group Citizenship Behavior," Journal of Business Ethics, Springer, vol. 152(4), pages 899-916, November.
    7. A. Newman & G. Schwarz & B. Cooper & S. Sendjaya, 2017. "How Servant Leadership Influences Organizational Citizenship Behavior: The Roles of LMX, Empowerment, and Proactive Personality," Journal of Business Ethics, Springer, vol. 145(1), pages 49-62, September.
    8. Omar S. Itani & Fernando Jaramillo & Larry Chonko, 2019. "Achieving Top Performance While Building Collegiality in Sales: It All Starts with Ethics," Journal of Business Ethics, Springer, vol. 156(2), pages 417-438, May.
    9. Gopal Krishnan & Marietta Peytcheva, 2019. "The Risk of Fraud in Family Firms: Assessments of External Auditors," Journal of Business Ethics, Springer, vol. 157(1), pages 261-278, June.
    10. Silke Eisenbeiss & Daan Knippenberg & Clemens Fahrbach, 2015. "Doing Well by Doing Good? Analyzing the Relationship Between CEO Ethical Leadership and Firm Performance," Journal of Business Ethics, Springer, vol. 128(3), pages 635-651, May.
    11. Shamas-ur-Rehman Toor & George Ofori, 2009. "Ethical Leadership: Examining the Relationships with Full Range Leadership Model, Employee Outcomes, and Organizational Culture," Journal of Business Ethics, Springer, vol. 90(4), pages 533-547, December.
    12. Robert Cialdini & Yexin Jessica Li & Adriana Samper & Ned Wellman, 2021. "How Bad Apples Promote Bad Barrels: Unethical Leader Behavior and the Selective Attrition Effect," Journal of Business Ethics, Springer, vol. 168(4), pages 861-880, February.
    13. Yan Ling & Michelle Hammond & Li-Qun Wei, 2022. "Ethical leadership and ambidexterity in young firms: examining the CEO-TMT Interface," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 25-48, March.
    14. Anastasia A. Zakolyukina, 2018. "How Common Are Intentional GAAP Violations? Estimates from a Dynamic Model," Journal of Accounting Research, Wiley Blackwell, vol. 56(1), pages 5-44, March.
    15. Lu-Ming Tseng, 2019. "How Implicit Ethics Institutionalization Affects Ethical Selling Intention: The Case of Taiwan’s Life Insurance Salespeople," Journal of Business Ethics, Springer, vol. 158(3), pages 727-742, September.
    16. Sigurdur Ragnarsson & Erla S. Kristjánsdóttir & Sigrún Gunnarsdóttir, 2018. "To Be Accountable While Showing Care: The Lived Experience of People in a Servant Leadership Organization," SAGE Open, , vol. 8(3), pages 21582440188, September.
    17. David Prottas, 2013. "Relationships Among Employee Perception of Their Manager’s Behavioral Integrity, Moral Distress, and Employee Attitudes and Well-Being," Journal of Business Ethics, Springer, vol. 113(1), pages 51-60, March.
    18. Colina Frisch & Markus Huppenbauer, 2014. "New Insights into Ethical Leadership: A Qualitative Investigation of the Experiences of Executive Ethical Leaders," Journal of Business Ethics, Springer, vol. 123(1), pages 23-43, August.
    19. Sebastian Goebel & Barbara E. Weißenberger, 2017. "The Relationship Between Informal Controls, Ethical Work Climates, and Organizational Performance," Journal of Business Ethics, Springer, vol. 141(3), pages 505-528, March.
    20. Nguyen Phan Hanh Thao & Seung-Wan Kang, 2020. "When Servant Leaders Inspire Followers to Become Organizational Citizens? Empirical Evidence From Vietnam," SAGE Open, , vol. 10(1), pages 21582440199, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:120:y:2014:i:2:p:251-274. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.