Corporate scandals and regulation

Hail, L, Tahoun, A and Wang, C (2018) Corporate scandals and regulation. Journal Of Accounting Research, 56 (2). pp. 617-671. ISSN 0021-8456

Abstract

Are regulatory interventions delayed reactions to market failures or can regulators proactively pre-empt corporate misbehavior? From a public interest view, we would expect “effective” regulation to ex ante mitigate agency conflicts between corporate insiders and outsiders, and prevent corporate misbehavior from occurring or quickly rectify transgressions. However, regulators are also self-interested and may be captured, uninformed, or ideological, and become less effective as a result. In this registered report, we develop a historical time series of corporate (accounting) scandals and (accounting) regulations for a panel of 26 countries from 1800 to 2015. An analysis of the lead-lag relations at both the global and individual country level yields the following insights: (i) Corporate scandals are an antecedent to regulation over long stretches of time, suggesting that regulators are typically less flexible and informed than firms. (ii) Regulation is positively related to the incidence of future scandals, suggesting that regulators are not fully effective, that explicit rules are required to identify scandalous corporate actions, or that new regulations have unintended consequences. (iii) There exist systematic differences in these lead-lag relations across countries and over time suggesting that the effectiveness of regulation is shaped by fundamental country characteristics like market development and legal tradition

More Details

Item Type: Article
Subject Areas: Accounting
Additional Information: This is the peer reviewed version of the following article: Hail, L., Tahoun, A. and Wang, C. (2018), Corporate Scandals and Regulation. Journal of Accounting Research, which has been published in final form at https://dx.doi.org/10.1111/1475-679X.12201. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. This paper is the final Registered Report resulting from the Registration-based Editorial Process (REP) implemented by Journal of Accounting Research (JAR) for its 2017 conference. Details of the REP are available here: https://research.chicagobooth.edu/- /media/research/arc/docs/journal/rep_policies_jar.pdf?la=en&hash=B64B8F1D368D8300BC83898C7E5CFD0557E71312
Subjects: A > Accounting procedures
F > Fraud
Date Deposited: 03 Jan 2018 08:46
Last Modified: 21 Jan 2019 22:20
URI: http://lbsresearch.london.edu/id/eprint/861
More

Export and Share


Download

Accepted Version - Text
  • Restricted to Repository staff only

Statistics

Altmetrics

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item