Criminal Convictions and Risk Taking

Posted: 14 Nov 2014

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: November 13, 2014

Abstract

An analysis of a proprietary dataset reveals that non-trivial proportions of directors, Chief Executive Officers (CEOs) and Chief Financial Officers in Swedish listed companies have been convicted or suspected of crimes. Based on prior literature, we argue that directors and senior executives who have been convicted or suspected of crimes are more prone to take risk. Consistent with this argument, we find that firms with more criminally convicted/suspected directors and CEOs report more volatile earnings, engage more in goodwill writeoffs due to more unsuccessful acquisitions, and recognize bad news in earnings in a less timely manner. We also find that these firms are, on average, smaller and less profitable. These findings highlight the role personal characteristics of directors and senior management play in managerial decisions.

Keywords: Accounting conservatism, corporate governance, criminal convictions, earnings volatility, goodwill writeoffs, risk

Suggested Citation

Amir, Eli and Kallunki, Juha-Pekka and Nilsson, Henrik, Criminal Convictions and Risk Taking (November 13, 2014). Australian Journal of Management, Vol. 39, No. 4, 2014, Available at SSRN: https://ssrn.com/abstract=2523900

Eli Amir (Contact Author)

Tel Aviv University ( email )

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

Juha-Pekka Kallunki

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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