Control Frauds as Financial Super-Predators: How 'Pathogens' Make Financial Markets Inefficient

45 Pages Posted: 16 Apr 2010

See all articles by William K. Black

William K. Black

University of Missouri at Kansas City - School of Law

Date Written: April 15, 2010

Abstract

White-collar criminology scholarship shows that “accounting control frauds” (frauds led by the CEO) use accounting fraud to deceive (or suborn) sophisticated financial market participants. Large control frauds cause greater financial losses than all other forms of property crimes combined. Weak regulation, supervision and ethics produce epidemics of control fraud that cause systemic economic damage. As with the natural world, these financial super predators act like pathogens that take over a firm and act as a “vector” to cause even greater damage. Control fraud theory poses a major challenge to the efficient markets hypothesis and the resulting praxis that devalues financial regulation.

Keywords: control fraud, lemon markets, fraud, regulation, efficient markets

JEL Classification: D21, D43, D82, G18, G28, G38, K22, K42, L51, M42, O16, O17

Suggested Citation

Black, William K., Control Frauds as Financial Super-Predators: How 'Pathogens' Make Financial Markets Inefficient (April 15, 2010). Available at SSRN: https://ssrn.com/abstract=1590400 or http://dx.doi.org/10.2139/ssrn.1590400

William K. Black (Contact Author)

University of Missouri at Kansas City - School of Law ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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