The peer effect of penalty against firm leaders

Wenjing Cai, Fuxiu Jiang and Jia Ma

Finance Research Letters, 2023, vol. 52, issue C

Abstract: This paper investigates whether and how penalty against firm leaders influences peer firm's financial misconduct. When observing salient penalties against their peers, firms tend to adjust their expected costs related to financial misconduct to a higher level. This will then weaken focal firm leaders’ motivation to commit financial misconduct given their expected benefits from it are determined. By employing a difference-in-differences (DID) method, we find supporting evidence. Further analyses show that this effect is more prominent when observing firms witness severer punishment or they are SOEs.

Keywords: Peer effect; Penalty against firm leaders; Salience theory; Financial misconduct (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322006602

DOI: 10.1016/j.frl.2022.103484

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