Learning from Failures of Co-owned Firms: Common Ownership and Information Disclosure Fraud

Ziwei Wang (), Chunfeng Wang () and Zhenming Fang ()
Additional contact information
Ziwei Wang: Capital University of Economics and Business
Chunfeng Wang: Tianjin University
Zhenming Fang: Tianjin University

Journal of Business Ethics, 2024, vol. 195, issue 1, No 5, 95-119

Abstract: Abstract This study focuses on learning effects between firms connected by common ownership. We explore the learning effects in a certain setting that how decision-makers in focal firms learn from punishments for fraudulent disclosure in their co-owned firms. Baseline results show that punishments for fraudulent disclosure in co-owned firms reduce information disclosure fraud in focal firms. The effects still exist after excluding other potential channels of learning. In mechanism analyses, similarities between focal firms and their co-owned firms and influential common shareholders enhance the learning effects. Further, after the events in co-owned firms, there is improvement in internal control in focal firms, which contributes to the reduction of fraudulent disclosure. Additionally, empirical results mitigate the concern that the reduction of fraud is not driven by the learning argued in this paper but decision-makers alternatively conducting more other unethical behaviors such as real earnings management. In sum, empirical results support the existence of learning effects. As common ownership is an important but highly underexplored linkage between firms, future research can study learning effects between firms connected by common ownership in other suitable settings.

Keywords: Common ownership; Information disclosure fraud; Learning effects (search for similar items in EconPapers)
JEL-codes: D83 G32 G34 Z13 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10551-024-05653-8 Abstract (text/html)
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:kap:jbuset:v:195:y:2024:i:1:d:10.1007_s10551-024-05653-8

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-024-05653-8

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().