The Local Spillover Effect of Corporate Accounting Misconduct: Evidence from City Crime Rates

65 Pages Posted: 17 Nov 2020

See all articles by Eric Holzman

Eric Holzman

The Ohio State University - Department of Accounting & Management Information Systems

Brian P. Miller

Indiana University - Kelley School of Business - Department of Accounting

Brian Williams

Indiana University - Kelley School of Business - Department of Accounting

Multiple version iconThere are 3 versions of this paper

Date Written: September 29, 2020

Abstract

This study documents a spillover effect of accounting fraud by showing that after the revelation of accounting misconduct, there is an increase in financially motivated neighborhood crime (robberies, thefts, etc.) in the cities where these misconduct firms are located. We find that more visible accounting frauds (e.g., greater media attention and larger stock price declines) are more strongly associated with a future increase in financially motivated neighborhood crime. Further, we predict that adverse shocks stemming from the fraud put pressure on local communities leading to greater incentives and rationalization for individuals to commit financially motivated crime. Consistent with our predictions, we find that the association between fraud revelation and increased future financially motivated crime is strongest when local city-wide unemployment increases, where local job markets are shallower, and where local income inequality is high.

Keywords: accounting misconduct; crime rate; corporate spillovers; income inequality

JEL Classification: E24; M40; M41; M51

Suggested Citation

Holzman, Eric and Miller, Brian P. and Williams, Brian, The Local Spillover Effect of Corporate Accounting Misconduct: Evidence from City Crime Rates (September 29, 2020). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3701740 or http://dx.doi.org/10.2139/ssrn.3701740

Eric Holzman (Contact Author)

The Ohio State University - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

Brian P. Miller

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2606 (Phone)

Brian Williams

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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