NBER WORKING PAPER SERIES
WHO BLOWS THE WHISTLE ON CORPORATE FRAUD?消防工程师证报考条件是什么>老马识途翻译
Alexander Dyck
xerox是什么Adair Mor
Luigi Zingales
Working Paper 12882
www.nber/papers/w12882
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachutts Avenue
Cambridge, MA 02138
February 2007
*Alexander Dyck thanks the Connaught Fund of the University of Toronto and Luigi Zingales the Center For Rearch on Security Prices, the Stigler Center, and the Initiative on Global Financial Markets at the University of Chicago for financial support. We would like to thank Alexander Phung and Victor Xin for truly outstanding rearch assistantship. We thank John Donohue, Jay Hartzell, Andrew Metrick, Shiva Rajgopal, Adriano Rampini, and minar participants at Harvard Business School, Harvard Law School, Michigan Law School, the University of Pennsylvania, the Duke-UNC Corporate Finance Conference, the NBER Summer Institute, the University of Texas Conference on Empirical Legal Studies and the American Finance Association Meetings (2007) for helpful comments. The views expresd herein are tho of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Rearch.
2008年考研英语真题© 2007 by Alexander Dyck, Adair Mor, and Luigi Zingales. All rights rerved. Short ctions of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
official
Who Blows the Whistle on Corporate Fraud?
Alexander Dyck, Adair Mor, and Luigi Zingalesemba学位
NBER Working Paper No. 12882
February 2007
JEL No. G3
ABSTRACT
What external control mechanisms are most effective in detecting corporate fraud? To address this question we study in depth all reported cas of corporate fraud in companies with more than 750 million dollars in asts between 1996 and 2004. We find that fraud detection does not rely on one single mechanism, but on a wide range of, often improbable, actors. Only 6% of the frauds are revealed by the SEC and 14% by the auditors. More important monitors are media (14%), industry regulators (16%), and employees (19%). Before SOX, only 35% of the cas were discovered by actors with an explicit mandate. After SOX, the performance of mandated actors improved, but still account for only slightly more than 50% of the cas. We find that monetary incentives for detection in frauds against the government influence detection without increasing frivolous suits, suggesting gains from extending such incentives to corporate fraud more generally.
Alexander Dyck
Joph L. Rotman School of Management University of Toronto
105 St. George Street
lather
Toronto, Ontario
Canada M5S 3E6
adyck@rotman.utoronto.ca
Adair Mor
University of Michigan
Ross School of Business
701 Tappan Street
Ann Arbor, MI 48109
adairm@umich.edu Luigi Zingales
5807 South Woodlawn Avenue Chicago, IL 60637
and NBER
luigi.zingales@gsb.uchicago.edu
The large and numerous corporate frauds that emerged in the United States at the ont of the new millennium provoked an immediate legislative respon in the Sarbanes Oxley Act (SOX). This law was predicated upon the idea that the existing institutions designed to uncover fraud (e.g., the auditors) had failed, and their incentives as well as their monitoring should be incread. The political imperative to act quickly prevented any empirical analysis to substantiate the law’s premis. Which actors play a role in deterring corporate fraud through detection? What motivates them? Did reforms target the right actors and change the situation? Can detection be improved in a more cost effective way?
To answer the questions we gather data on a comprehensive sample of alleged corporate frauds in the United States that took place between 1996 and 2004 in companies with more than 750 million dollars in asts. After screening for frivolous suits, we end up with a sample of 230 cas of alleged corporate frauds, which include all of the high profile cas such as Enron, HealthSouth, and
World Com.1
Through an extensive reading of each fraud’s history, we identify who is involved in the revelation of the fraud, and what are the circumstances that lead to its detection. Using data on the fraud duration we study the timing of revelation to infer which mechanisms are more efficient in revealing fraud. To understand better why the fraud detectors are active, we study the sources of information and the incentives detectors face in bringing the fraud to light. To identify the role played by short llers, we look for unusual levels of short positions before a fraud emerges.
1 In that follows we will drop the term alleged and simply refer to fraud. While a number of the cas have ttled with findings of fact of fraud, the majority of them ttled for financial payment without any admittance of wrongdoing and hence, from a legal point of view, remains allegations.
We find that no specific actor dominates the revelation of fraud. Even using the most comprehensive and generous interpretation, shortllers and equity holders revealed the fraud in only 9 percent of the cas. Financial analysts and auditors do a little better (each accounting for 14 percent of the cas), but they hardly dominate the scene. The Securities and Exchange Commission (SEC) accounts for only 6 percent of detected frauds by external actors. More surprising is the key role play
ed by actors who lack a direct role in investment markets, such as the the media (14 percent), non-financial-market regulators (16 percent), and employees (19 percent).
pimpAs interesting as who detects corporate fraud are who did not. Stock exchange regulators, commercial banks, and underwriters are notable for their complete abnce. Also, private curity litigation plays a minimal role (less than 2 percent) in the detection of fraud. This does not mean that it is uless to prevent fraud, since it could be the mechanism through which people committing fraud are forced to pay for their mistakes. But it does suggest that this mechanism cannot work alone. It needs another (vast) t of institutions to help bring fraud to light.
新视野大学英语2课后答案
finish的用法Another way to measure the relative efficiency of tho actors, besides the frequency, is to look at the average speed with which the actors bring fraud to light. Financial analysts and short llers are in a league of their own, taking only a median duration of 9.1 months to reveal fraud. The are the players who market role is clost to a financial monitoring mechanism. Frauds that make it through the monitors are then caught by tho with a significant stake in the firm: external equity holders (15.9 months), suppliers, clients and competitors (13.3 months). Non financial market regulators and auditors also em to intervene at a similar speed (respectively 13.3 and
14.7 months). Finally, for frauds that persist longer, revelation of the fraud is left to actors with weaker access to the firm, namely, the media (21.0 months), the SEC (21.2 months), and professional rvice firms like plaintiff lawyers (31.4 months), or to employee whistleblowers (20.9 months).
Having identified the whistle blowers, we then investigate the cost-benefit trade offs they face. Despite their acitivity, analysts, journalists, auditing firms, and employees who bring fraud to light do not em to be rewarded in monetary or in career terms. Direct payment is made extremely unlikely by insider trading laws that constrain individuals with material inside information from profiting directly by shorting the stock themlves. Thus, we arch for other indications of rewards. If detection were a high payoff activity, we would expect tho revealing frauds to be the young aggressive types looking to u revealing fraud to promote their careers. By contrast, we find that 59 percent of analysts’ detections are done by more asoned analysts working at top 10 investment banks. In newspapers, almost all the fraud revelations are published in top newspapers by established journalists.
We do, on the other hand, identify real costs to blowing the whistle. Conditional on a fraud being committed, auditing firms are more likely to lo the job when they reveal it than when they do not. In
45 % of the cas, the employee blowing the whistle does not identify him or herlf individually and in 82% of cas with named employees, the individual alleges that they were fired, quit under duress, or had significantly altered responsibilities as a result of bringing the fraud to light.
Generalizing from the results on the identity and incentives of fraud detectors, we arrive at what might be called a paradox of whistle blowing: tho with the weakest
