Legal penalty for fraud and CEO turnover

Nana Yamfo Amoah

Journal of Accounting & Organizational Change, 2013, vol. 9, issue 3, 322-335

Abstract: Purpose - The purpose of this study is to investigate the relation between the size of the legal penalty for fraud and CEO turnover. Design/methodology/approach - Using a sample of 93 securities lawsuits that were filed in the US between 1997 and 2005, logit regression is used in the analysis of the relation between probability of CEO turnover and size of the litigation monetary penalty and ordinal logit regression is used to examine the relation between timing of CEO turnover and size of the litigation monetary penalty. Findings - A positive association is documented between the size of the monetary penalty and the probability of CEO turnover. A larger monetary penalty is associated with earlier CEO turnover. Equity issue related securities lawsuit is associated with a higher probability of CEO turnover and an earlier CEO turnover. Research limitations/implications - The results imply that the greater the legal penalty levied on the sued firm, the more likely the CEO is considered as being complicit in the alleged fraud. A limitation of this study is that in constructing the sample, some meritorious lawsuits that may have resulted in legal penalty but were dismissed for procedural reasons were excluded. Further, the CEO turnover data did not provide sufficient information about the reason for the termination of the CEOs. Originality/value - This is one of the first empirical studies to examine the relation between the legal penalty for fraud and CEO turnover in the period after the Private Securities Litigation Reform Act. This study adds to the existing literature on the consequences of financial misreporting on managers by documenting an association between the legal penalty for fraud and CEO turnover.

Keywords: Legal penalty; Fraud; Securities lawsuit; Monetary penalty; Settlement; CEO turnover (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jaocpp:jaoc-09-2011-0045

DOI: 10.1108/JAOC-09-2011-0045

Access Statistics for this article

Journal of Accounting & Organizational Change is currently edited by Prof Zahirul Hoque

More articles in Journal of Accounting & Organizational Change from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().