Corporate Fraud, Governance, and Auditing

Marco Pagano and Giovanni Immordino

The Review of Corporate Finance Studies, 2012, vol. 1, issue 1, 109-133

Abstract: We analyze corporate fraud in a setting in which managers have superior information but are biased against liquidation because of their private benefits from empire building. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To curb fraud, shareholders optimally design corporate governance by jointly choosing audit quality and managerial compensation. We analyze how country-level rules affect these firm-level choices. Our analysis underscores that different country-level governance provisions have different effects on firm-level governance: Some act as substitutes of internal governance mechanisms, whereas others enhance their effectiveness and therefore complement them.

JEL-codes: G28 K22 M42 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Corporate Fraud, Governance and Auditing (2012)
Working Paper: Corporate Fraud, Governance and Auditing (2009)
Working Paper: Corporate Fraud, Governance and Auditing (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:rcorpf:v:1:y:2012:i:1:p:109-133.

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