Fraud Recovery and the Quality of Country Governance

59 Pages Posted: 23 Sep 2017

See all articles by Filippo Curti

Filippo Curti

Federal Reserve Banks - Federal Reserve Bank of Richmond

Atanas Mihov

Federal Reserve Bank of Richmond

Date Written: August 24, 2017

Abstract

Using supervisory data from U.S. financial institutions on fraud-related losses in foreign markets, we find that losses in countries with poor governance have lower recovery rates. Our results are robust to accounting for potential endogeneity and reverse causality concerns, among numerous robustness checks. The association is driven by intuitive governance dimensions such as control of corruption, rule of law, regulatory quality and government effectiveness. In addition, country governance plays a particularly important role in fraud recovery for firms with poor risk management quality. Overall, this paper presents unique and novel evidence tying country governance quality to firm-level risk realizations.

Keywords: Crime; Fraud; Recovery; International markets; Banking; Country institutions; Governance

JEL Classification: G15, G18, G19, G21, G32

Suggested Citation

Curti, Filippo and Mihov, Atanas, Fraud Recovery and the Quality of Country Governance (August 24, 2017). Available at SSRN: https://ssrn.com/abstract=3040720 or http://dx.doi.org/10.2139/ssrn.3040720

Filippo Curti

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Atanas Mihov (Contact Author)

Federal Reserve Bank of Richmond ( email )

530 East Trade Street
Charlotte, NC 28202
United States

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