Corporate Accountability Reporting and High-Profile Misconduct
Posted: 28 Jul 2015 Last revised: 5 Mar 2016
Date Written: June 30, 2015
I investigate whether corporate accountability reporting helps protect firm value. Specifically, I examine: 1) whether corporate accountability reporting helps firms prevent the occurrence of high-profile misconduct (e.g., bribery, kickbacks, discrimination), and 2) whether prior corporate accountability reporting reduces the negative stock price reaction when high-profile misconduct does occur. Using multiple methods to address self-selection, I find that, on average, firms that report on their corporate accountability activities are less likely to engage in high-profile misconduct, consistent with the reporting process helping firms to manage their operations better. Additionally, I find that when high-profile misconduct does occur, firms that have previously issued corporate accountability reports experience a less negative stock price reaction, consistent with corporate accountability reports influencing perceptions of managerial intent, which in turn influences expected punishments.
Keywords: corporate accountability reporting, corporate social responsibility, misconduct
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