Corporate Securities Fraud: Insights from a New Empirical Framework
Tracy Yue Wang
University of Minnesota - Twin Cities - Carlson School of Management
November 1, 2010
Journal of Law, Economics, and Organization, Forthcoming
Empirical analysis of corporate fraud faces a challenge because the commission of fraud is not directly observable. We observe only detected frauds. In this paper I introduce a new empirical model to address this partial observability of fraud. The new model generates new insights about not only the determinants of fraud commission and fraud detection, but also the interaction between the two latent processes. I also show that the empirical models used in the existing literature can lead to incorrect assessment of corporate or public policies designed to combat fraud.
Number of Pages in PDF File: 43
Keywords: securities fraud, fraud detection
JEL Classification: G30Accepted Paper Series
Date posted: July 6, 2004 ; Last revised: April 2, 2011
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