CORPORATE FRAUD AND BUSINESS CONDITIONS: EVIDENCE FROM IPOS
Using a sample of firms that went public between 1995 and 2002, we examine whether a firms incentive to commit fraud when raising external capital varies with investor beliefs about industry business conditions as predicted by Povel, Singh and Winton (2007). We document a concave relationship between fraud propensity and optimism in investor beliefs. A firm is more likely to commit fraud when investors are more optimistic about the firms industry prospect. Nevertheless, the probability of fraud decreases in the presence of extreme investor optimism, as the firm is able to obtain funding without misrepresenting information to outside investors. We also find evidence that venture capitalists and underwriters have different monitoring incentives. When venture capitalists are present, fraud is less likely for low investor beliefs but more likely for high investor beliefs; this suggests that venture capitalists primarily monitor to seek good returns for their investment and thus take investor beliefs into account. By contrast, underwriters monitoring choices appear to be more concerned with preventing fraud per se so as to protect their reputations. These findings are consistent with the predictions from Povel, Singh and Winton (2007).
initial public offerings investor sentiment corporate fraud financial intermediations
Tracy Y. Wang Andrew Winton Xiaoyun Yu
Carlson School of Management University of Minnesota Kelley School of Business Indiana University
国际会议
大连
英文
1-58
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）