How does judges' personal exposure to financial fraud affect white-collar sentencing?

Trung Nguyen, Aneesh Raghunandan and Alexa Scherf

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study whether federal judges’ personal exposure to financial fraud affects their professional behavior, in the form of sentencing outcomes in white-collar cases. Following the methodology outlined in our registered report, we construct a novel measure of financial fraud exposure based on judges’ direct shareholdings in firms that commit financial fraud. Using this measure, we exploit the random assignment of cases to judges to examine whether judges exposed to fraud in one firm are (1) less likely to rule in favor of defendants in white-collar cases involving other firms and (2) less likely to grant favorable pretrial motions to defendants. We find minimal evidence in support of either (1) or (2), concluding that for all but the most serious frauds, judges are unlikely to let their personal victimhood experience affect their professional sentencing behavior with respect to related cases. Our study broadens our understanding of the spillover effects of financial fraud enforcement and contributes to the literature on how judges’ personal experiences can shape judicial decision-making.

Keywords: fraud; judge biases; personal financial disclosure; white-collar crime (search for similar items in EconPapers)
JEL-codes: M40 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2025-05-31
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Published in Journal of Accounting Research, 31, May, 2025, 63(2), pp. 989 - 1029. ISSN: 0021-8456

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:124397

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