The Local Spillover Effect of Corporate Accounting Cases

The consequences for companies and individuals directly involved in corporate accounting misconduct are severe. Research has documented that after such misconduct is revealed, the market value of corporations declines, executives are terminated, and auditors are often dismissed. While the implications for those directly involved in the misconduct are well documented, the broader spillover impacts are less clear. Our study examines one such effect by investigating whether the revelation of a major corporate accounting misconduct in a community leads to an increase in neighborhood financial crime.

Our prediction that it does stems from social psychology literature that suggests groups of people … Read more