The impact of corporate fraud on ...
Document type :
Compte-rendu et recension critique d'ouvrage
DOI :
Title :
The impact of corporate fraud on director-interlocked firms: Evidence from bank loans
Author(s) :
Lai, Tat-Kei [Auteur]
Lille économie management - UMR 9221 [LEM]
Lei, Adrian C.H. [Auteur]
Song, Frank [Auteur]
Lille économie management - UMR 9221 [LEM]
Lei, Adrian C.H. [Auteur]
Song, Frank [Auteur]
Journal title :
Journal of business finance & accounting
Pages :
32-67
Publication date :
2019-01
HAL domain(s) :
Sciences de l'Homme et Société/Economies et finances
English abstract : [en]
We examine the impact of corporate fraud committed by one firm (the “fraudulent firm”) on other firms with interlocking directors (the “interlocked firms”), focusing on the debtholder side. We argue that the revelation of ...
Show more >We examine the impact of corporate fraud committed by one firm (the “fraudulent firm”) on other firms with interlocking directors (the “interlocked firms”), focusing on the debtholder side. We argue that the revelation of a fraudulent firm's fraud can damage the reputation of the interlocked firms because corporate governance can propagate via director interlocks. Empirically, we find that the interlocked firms' cost of debt is higher and the loan covenants become stricter after the fraud cases of the fraudulent firms are revealed. Consistent with the corporate governance propagation explanation, our results are weaker (stronger) for interlocked firms that have better (worse) pre‐event corporate governance standards. Our findings suggest that corporate fraud of fraudulent firms can affect other firms through director‐interlocks beyond shareholder value.Show less >
Show more >We examine the impact of corporate fraud committed by one firm (the “fraudulent firm”) on other firms with interlocking directors (the “interlocked firms”), focusing on the debtholder side. We argue that the revelation of a fraudulent firm's fraud can damage the reputation of the interlocked firms because corporate governance can propagate via director interlocks. Empirically, we find that the interlocked firms' cost of debt is higher and the loan covenants become stricter after the fraud cases of the fraudulent firms are revealed. Consistent with the corporate governance propagation explanation, our results are weaker (stronger) for interlocked firms that have better (worse) pre‐event corporate governance standards. Our findings suggest that corporate fraud of fraudulent firms can affect other firms through director‐interlocks beyond shareholder value.Show less >
Language :
Anglais
Popular science :
Non
Collections :
Source :