Criminal Convictions and Risk Taking: Empirical Evidence from Sweden

42 Pages Posted: 19 Oct 2009 Last revised: 21 Nov 2011

See all articles by Eli Amir

Eli Amir

Tel Aviv University

Juha-Pekka Kallunki

University of Oulu - Department of Economics, Accounting and Finance

Henrik Nilsson

Stockholm School of Economics - Department of Accounting

Date Written: Nov 18, 2011

Abstract

An analysis of a unique proprietary dataset reveals that non-trivial proportions of directors, CEOs and CFOs in Swedish listed companies have been convicted of crimes. Based on prior literature, we argue that directors and senior executives with prior criminal convictions are more prone to take risk. Consistent with this argument, we find that firms appointing criminally convicted directors and CEOs report more volatile earnings, engage more in goodwill writeoffs due to unsuccessful acquisitions, and recognize bad news in earnings in a less timely manner. Moreover, we find that these firms are, on average, less profitable, and smaller. These findings highlight the role personal characteristics of directors and senior management play in managerial decisions. Our results suggest that firms should put more emphasis on personal characteristics in appointing directors and senior executives.

Keywords: Criminal convictions, Earnings volatility, Profitability, Acquisitions, Directors, Executives, Accounting conservatism, Goodwill writeoffs

JEL Classification: M41, G1, G3, K42

Suggested Citation

Amir, Eli and Kallunki, Juha-Pekka and Nilsson, Henrik, Criminal Convictions and Risk Taking: Empirical Evidence from Sweden (Nov 18, 2011). Available at SSRN: https://ssrn.com/abstract=1489829 or http://dx.doi.org/10.2139/ssrn.1489829

Eli Amir

Tel Aviv University ( email )

312 Recanati Bldg.
69978 Tel Aviv
Israel
+972 3 640-8510 (Phone)
+972 3 640-7738 (Fax)

Juha-Pekka Kallunki (Contact Author)

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014
Finland
+358 8 553 2956 (Phone)
+358 8 553 2906 (Fax)

HOME PAGE: http://www.cc.oulu.fi/~jpkallun

Henrik Nilsson

Stockholm School of Economics - Department of Accounting ( email )

PO Box 6501
Stockholm, 11383
Sweden

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