AN EMPIRICAL ANALYSIS OF MARKET REACTION TO CORPORATE ACCOUNTING MALFEASANCE

Liz Washington Arnold and Peter Harris

Accounting & Taxation, 2012, vol. 4, issue 1, 25-42

Abstract: This study examines corporate accounting malfeasance from an exploratory and empirical perspective for 100 companies to determine if there is an association between the Jenkins recommendations and SOX requirements and to determine if there are any differences between the internal and external monitoring characteristics of malfeasance and non-malfeasance companies. The exploratory perspective discusses the types of corporate malfeasance and gives an accounting and market dollar impact ($140 and $857 billion respectively) of 100 companies with publicly announced malfeasance and supports previous studies findings that revenue was the most common area of corporate malfeasance and theft was the least. The empirical study examined internal (corporate governance) and external (auditor and financial analysis) monitoring characteristics by matching the malfeasance companies with non-malfeasance companies. This empirical study did not find any significant differences in the monitoring characteristics of the companies even though these characteristics were chosen based on an examination of recommendations/requirements for business reporting for SOX and several accounting committees over the years. Previous studies indicated a difference.The research contributes to contemporary accounting literature by providing a dollar measurement of the accounting and related market impact for malfeasance companies and a systematic investigation testing monitoring characteristics between malfeasance and non-malfeasance companies.

Keywords: Accounting Restatements; Accounting Malfeasance; Corporate Malfeasance; SOX; Jenkins Report; Jenkins Recommendations. (search for similar items in EconPapers)
JEL-codes: M4 M40 M41 M48 M49 (search for similar items in EconPapers)
Date: 2012
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