blackdatingnetwork - Does backdating explain the stock price pattern around

Our recent research suggests that it may be driven by the actions and attitudes of those at the very top level of corporate leadership – in particular the CEO (Biggerstaff, Cicero and Puckett 2013).

Our findings are consistent with a growing literature that emphasises the influence of those in the upper echelons of corporate leadership (Chatterjee and Hambrick 2007, Hambrick 2007).

The challenge when exploring the influence of an executive’s character on corporate culture is that the character of top executives is inherently difficult to measure.

does backdating explain the stock price pattern around-25

Geir Bjønnes (Ph D BI Norwegian Business School)Research areas: Market microstructure, fixed income, international finance.

Curbing corporate misbehaviour is a key policy goal but fixing the problem requires an understanding of what causes it.

This column develops an innovative empirical approach that identifies unethical CEOs as an important cause of unethical corporation behaviour.

The subject of business ethics and the refinement of provisions in the Sarbanes-Oxley Act continue to occupy a prominent role in on-going public policy debates.

Of particular importance in the current dialogue is an understanding of (and potential means to mitigate) the forces that drive firms to mislead investors and cause the misallocation and destruction of scarce societal resources.

In short: Anecdotal evidence suggests that these fraudulent firms were often characterised by an unethical culture that permeated a nexus of employees, whose cooperation was necessary to perpetrate extensive corporate malfeasance.

For instance, approximately 30 employees at Heathsouth and Peregrine Systems were convicted or pleaded guilty to charges related to financial statement fraud.

One of the great features of the modern economy is that firms can be owned by a diverse group of outside investors while day-to-day business operations are delegated to full-time managers.

Such ownership arrangements allow for immense economic gains since capital is allocated to its highest use and risk is borne more efficiently.

This can be seen in the market losses associated with financial statement frauds uncovered at firms such as Enron, World Com, Tyco, and Health South.

As a result of these frauds and others, the US Federal Government passed the Sarbanes-Oxley Act in 2002 in order to help restore investor confidence in the modern corporate structure.

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