Criminal convictions and risk taking

Eli Amir, Juha-Pekka Kallunki and Henrik Nilsson
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Eli Amir: Tel Aviv University, Israel; City University London, UK
Juha-Pekka Kallunki: University of Oulu, Finland
Henrik Nilsson: Stockholm School of Economics, Sweden

Australian Journal of Management, 2014, vol. 39, issue 4, 497-523

Abstract: An analysis of a proprietary dataset reveals that non-trivial proportions of directors, Chief Executive Officers (CEOs) and Chief Financial Officers in Swedish listed companies have been convicted or suspected of crimes. Based on prior literature, we argue that directors and senior executives who have been convicted or suspected of crimes are more prone to take risk. Consistent with this argument, we find that firms with more criminally convicted/suspected directors and CEOs report more volatile earnings, engage more in goodwill writeoffs due to more unsuccessful acquisitions, and recognize bad news in earnings in a less timely manner. We also find that these firms are, on average, smaller and less profitable. These findings highlight the role personal characteristics of directors and senior management play in managerial decisions.

Keywords: Accounting conservatism; corporate governance; criminal convictions; earnings volatility; goodwill writeoffs; risk (search for similar items in EconPapers)
JEL-codes: G10 G30 K42 M41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:39:y:2014:i:4:p:497-523

DOI: 10.1177/0312896213513276

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