Economic freedom, financial development and the determinants of fraud and scandal: The United Kingdom, 1900–2010

Steven Toms and Chieh Lin

Business History, 2025, vol. 67, issue 1, 268-295

Abstract: The paper argues that the incidence of financial fraud and scandals has systemic macro-economic determinants. While not denying organisation specific causes, short-run triggering events, and key players’ motivations, it shows that the extent of fraud and the number of financial scandals depend on the opportunities created by the financial system’s evolution. Using archival and quantitative evidence from the United Kingdom, it specifies aggregate changes in the incidence of fraud and scandal between 1900 and 2010. The evidence shows that economic freedom, including the degree of financial development, the availability of credit, the relative importance of the financial sector, international capital mobility and secrecy, and banking stability, contribute to the prevalence of fraud and scandal. Financial repression explains a generalised reduction in a 25-year period after the Second World War. Conversely, economic liberalisation from 1979 onwards has increased the incidence of fraud and financial scandal.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:taf:bushst:v:67:y:2025:i:1:p:268-295

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DOI: 10.1080/00076791.2023.2264215

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