Internal Governance Mechanisms and Corporate Misconduct
IESEG Working Paper Series 2022-ACF-05
46 Pages Posted: 26 Sep 2022
Date Written: September 6, 2022
This study aims to provide new evidence linking internal corporate governance mechanisms and corporate misconduct, using a sample of 2,844 public US companies during the period 2007-2019. The results reveal that optimal size and diverse boards, including well-functioning audit committees, are negatively related to corporate violations. In contrast, we show that board members’ independence, activity, and ownership are positively related to a firm’s fraudulent activities. Therefore, not all internal governance mechanisms are related to lower corporate misconduct. Moreover, we show that some internal governance mechanisms, such as the share of female board members, mitigate only certain types of corporate misconduct.
Keywords: corporate misconduct, internal governance mechanisms, board of directors, committees ownership
JEL Classification: G01, G34, G38, K22, L51, M41
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