Whole Network Most Recent TOP10 Accounting Compliance Ethics SOX

 

Fraud and IPOs

Filed in archive corporate crime by leon on March 31, 2008

19151561.jpg


Is fraud affected by investor beliefs about business conditions? How is that reflected in the data from IPOs?

A study by Tracy Wang and Andrew Winton from the University of Minnesota, and Xiaoyun Yu from Indiana University comes up with some interesting findings.

The study, Corporate fraud and business conditions: evidence from IPOs found that companies are more likely to commit fraud when investors are more optimistic about the firm's industry prospect. surveyinglinks the the SEC's Accounting and Auditing Enforcement releases filed from 1996 to 2005, and data from the Stanford Law School's Securities Class Action Clearinghouse, revealed that firms that commit fraud at their IPO stage are also underwritten by investment banks with significantly lower industry specific expertise. They also operate in an industry that is more likely to be sued, have worse stock returns, higher return volatilities, and larger share turnover.

But then, the probability of fraud decreases when investors are really optimistic about the company's prospects. That's because the company is able to obtain funding without misrepresenting information to outside investors.

This study sends a message to regulators and auditors. You can't expect investors to stop or monitor fraud. All they want are good returns. But because fraud seems to peak in relatively good times, regulators and auditors need to be especially vigilant during a boom.


Advertisement


Permalink: Fraud and IPOs
Tags: Corporate  fraud  and  business  conditions:  evidence  from  IPOs  ipos  fraud+ipos 

Trackback: http://www.creative-weblogging.com/cgi-bin/mt-tb.pl/118468



Related Entries:

Financial Great Wall Still Impedes IPOs - 05 June 2006

Sarbanes-Oxley: no deterrent to IPOs - 22 February 2007

Fraud and SOX failure - 13 June 2007

Who exposes corporate fraud? - 11 February 2008

Corporate fraud surges - 18 April 2008

Advertisement


Advertisement


CW ToolbarInstall
RSSrss   | See all blog subscribe options
Googlegoogle   |   What is RSS?
Yahoo!yahoo
AddthisAddThis Feed Button
BloglinesBloglines
Newsletter

Use our search feature to look for other interesting posts

Just this blog Whole network
Advertisement -
Book yours here..


 
Advertisement
Book yours here.



  • Other blogs in the same channel in the Creative Weblogging Network

Advertisement -
Book yours here..






Advertisement - Book yours here..
 
Tagcloud: Accounting boards of directors Compliance corporate crime corporate governance corporate reputation Ethics events executive pay litigation markets regulators risk shareholder activism SOX Sponsored Blog strategy