The Consequences to Managers for Financial Misrepresentation

Jonathan Karpoff (), D. Scott Lee () and Gerald S. Martin ()
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D. Scott Lee: University of Nevada, Lee Business School
Gerald S. Martin: American University, Kogod School of Business

Chapter Chapter 14 in Accounting and Regulation, 2014, pp 339-375 from Springer

Abstract: Abstract We track the fortunes of all 2,206 individuals identified as responsible parties for all 788 Securities and Exchange Commission (SEC) and Department of Justice (DOJ) enforcement actions for financial misrepresentation from January 1, 1978 through September 30, 2006. A total of 93 % lose their jobs by the end of the regulatory enforcement period. Most are explicitly fired. The likelihood of ouster increases with the cost of the misconduct to shareholders and the quality of the firm’s governance. Culpable managers also bear substantial financial losses through restrictions on their future employment, their shareholdings in the firm, and SEC fines. A sizeable minority (28 %) face criminal charges and penalties, including jail sentences that average 4.3 years. These results indicate that the individual perpetrators of financial misconduct face significant disciplinary action.

Keywords: Enforcement Action; Target Firm; Board Independence; Government Accountability Office; Board Chair (search for similar items in EconPapers)
Date: 2014
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Journal Article: The consequences to managers for financial misrepresentation (2008)
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DOI: 10.1007/978-1-4614-8097-6_14

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