Information Production, Misconduct Effort, and the Duration of Corporate Fraud

Jonathan Black, Maximiliano da Silva, Mattias Nilsson and Roberto Pinheiro

No 1613, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: We develop and test a model linking the duration of financial fraud to information produced by auditors and analysts and efforts by managers to conceal the fraud. Our empirical results suggest fraud termination is more likely in the quarter following the release of audited financial statements, especially when reports contain explanatory language, indicating auditors? observable signals reduce fraud duration. Analyst attention increases the likelihood of fraud termination, but the marginal effect beyond the first analyst is negative, possibly due to free riding and herding behavior impairing analysts? ability to illuminate misconduct. Finally, evidence suggests managerial concealment significantly increases fraud duration.

Keywords: Fraud duration; Information production; Fraud effort; Auditor reports; hazard models (search for similar items in EconPapers)
JEL-codes: G34 G38 K22 K42 L51 M41 (search for similar items in EconPapers)
Pages: 89 pages
Date: 2016-06-01
New Economics Papers: this item is included in nep-acc and nep-law
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Citations: View citations in EconPapers (1)

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https://doi.org/10.26509/frbc-wp-201613r Full text (text/html)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1613

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