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Manager Unethical Behavior During The New Economy Bubble

This paper investigates factors that brought about the surge in manager unethical behavior within the US economy. Key structural causes are the weak internal control, perverse incentives related to managers’ compensation, conflicts of interest in the banking and auditing sectors. Unethical behavior was further enhanced by the large economic noise specific to the IT bubble, which emerged in the late nineties against the background of increased deregulation in the goods and financial markets. The US administration opposed to the proliferation of CEO unethical behavior the Sarbanes-Oxley Act of 2002; we argue why some of its provisions might be taken one step further

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Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 03026.

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Length: 36 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:ebg:essewp:dr-03026
Contact details of provider: Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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  1. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  2. Benjamin E. Hermalin & Michael S. Weisbach, 2001. "Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature," NBER Working Papers 8161, National Bureau of Economic Research, Inc.
  3. Tiroley, Jean, 2000. "Corporate Governance," CEI Working Paper Series 2000-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  4. Baruch Lev, 2003. "Corporate Earnings: Facts and Fiction," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 27-50, Spring.
  5. Wayne Guay & Richard Sloan, 2003. "Accounting for Employee Stock Options," American Economic Review, American Economic Association, vol. 93(2), pages 405-409, May.
  6. Cuny, Charles J. & Jorion, Philippe, 1995. "Valuing executive stock options with endogenous departure," Journal of Accounting and Economics, Elsevier, vol. 20(2), pages 193-205, September.
  7. Paul M. Healy & Krishna G. Palepu, 2003. "The Fall of Enron," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 3-26, Spring.
  8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  9. Brickley, James A. & Smith Jr., Clifford W. & Zimmerman, Jerold L., 2002. "Business ethics and organizational architecture," Journal of Banking & Finance, Elsevier, vol. 26(9), pages 1821-1835, September.
  10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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