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

Posted: 8 Feb 2021

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: October 23, 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. We also find that the association between fraud revelation and increased future financially motivated crime is strongest when local job markets are shallower and where local income inequality is high, consistent with adverse shocks from fraud putting pressure on local communities. Combined, our study provides evidence that the societal ramifications of corporate accounting misconduct extend beyond adversely impacting a firm’s capital providers and industry peers to negatively influence the daily life of the residents in the firm’s local community.

Keywords: accounting misconduct, real effects, crime rate, corporate spillover, income inequality, accounting fraud

Suggested Citation

Holzman, Eric and Miller, Brian P. and Williams, Brian, The Local Spillover Effect of Corporate Accounting Misconduct: Evidence from City Crime Rates (October 23, 2020). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3763692

Eric Holzman

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

2100 Neil Avenue
Columbus, OH 43210
United States

Brian P. Miller (Contact Author)

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
77
PlumX Metrics