Suspect CEOs, unethical culture, and corporate misbehavior

Lee Biggerstaff, David C. Cicero and Andy Puckett

Journal of Financial Economics, 2015, vol. 117, issue 1, 98-121

Abstract: We show that firms with Chief Executive Officers (CEOs) who personally benefit from options backdating are more likely to engage in other corporate misbehaviors, suggestive of an unethical corporate culture. These firms are more likely to commit financial fraud to overstate earnings. They acquire more private companies, which could perpetuate their frauds, and their acquisitions are met with lower market responses. These misbehaviors are concentrated in firms with externally hired suspect CEOs, consistent with outside CEOs having greater discretion to shape firm culture. The costs of these misbehaviors are reflected in larger stock price declines during a market correction and increased CEO replacement.

Keywords: Corporate culture; Ethics; Fraud; CEO; Option backdating (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:117:y:2015:i:1:p:98-121

DOI: 10.1016/j.jfineco.2014.12.001

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