Governance and Performance Changes after Accusations of Corporate Fraud

Posted: 21 Jul 2006

See all articles by Dalia Marciukaityte

Dalia Marciukaityte

Louisiana Tech University - College of Administration & Business

Samuel H. Szewczyk

Drexel University - Department of Finance

Hatice Uzun

Long Island University

Raj Varma

University of Delaware - Department of Finance

Abstract

Using a sample of companies charged with government, financial reporting, or stakeholder fraud or regulatory violation in the United States during the 1978-2001 period, this study found that after the accusation of fraud, companies increased the proportion of outsider directors on their boards of directors and on the monitoring committees of the boards. Furthermore, the results show comparable long-run stock price and operating performance between companies charged with fraud and a matching sample of companies not accused of fraud. Collectively, these results suggest that improvements in internal control systems following accusations of fraud help repair a company's damaged reputation and reinstate confidence in the company.

Keywords: Corporate Governance, Advocacy, Regulatory, and Legislative Issues: Regulatory and Legislative Activities

Suggested Citation

Marciukaityte, Dalia and Szewczyk, Samuel H. and Uzun, Hatice and Varma, Raj, Governance and Performance Changes after Accusations of Corporate Fraud. Financial Analysts Journal, Vol. 62, No. 3, pp. 32-41, June 2006, Available at SSRN: https://ssrn.com/abstract=918103

Dalia Marciukaityte (Contact Author)

Louisiana Tech University - College of Administration & Business ( email )

P.O. Box 3178
Ruston, LA 71272
United States
318-280-7340 (Phone)
318-257-4253 (Fax)

Samuel H. Szewczyk

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-1746 (Phone)

Hatice Uzun

Long Island University ( email )

1 University Plaza
Brooklyn, NY 11201-6572
United States

Raj Varma

University of Delaware - Department of Finance ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States
302-831-1786 (Phone)
302-831-3062 (Fax)

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