Big name corporations with robust growth profiles are more likely to be caught up in corporate fraud than smaller, struggling firms.
Corporate fraud is an illegal, unethical, and highly strategized maneuver committed by a company or an individual associated with the company in order to defraud investors, and the government of millions and even billions in tax revenue. The fraud schemes involve approaches to misrepresent the company’s financial standing by use of false accounting practices.
In a corporate world, this type of elite, while-collar crime is not very uncommon. In fact, it’s been going on since the 15th century England.
In the study published in Justice Quarterly, the researchers zeroed in on data on more than 250 U.S. public corporations that had involvement in financial securities fraud identified in more than 1000 Securities and Exchange Commission filings from 2005 to 2013.
Upon comparing their characteristics to a control sample of over 500 firms (from Compustat) that were not listed in SEC fiscal evasion filings, they found growing fads in the risk of fraud including corporations that were listed in the Fortune 500, traded on the NYSE and had strong growth prospects.
“Prestigious companies, those that are household names, were actually more prone to engage in financial fraud, which was very surprising,” said Jennifer Schwartz, WSU sociologist and lead author on the study in a news release.
“We thought it would be companies that were struggling financially, that were nearing bankruptcy, but it was quite the opposite. It was the companies that thought they should be doing better than they were, the ones with strong growth imperatives–those were the firms that were most likely to cheat.”
Corporate financial securities frauds are usually surreptitious and nonviolent in nature. They are also understudied especially when [ … ]