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From Financial Misdemeanants to Recidivists: The Perspective of Social Networks

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  • Bao, Fenghua
  • Zhao, Yapu
  • Tian, Longwei
  • Li, Yuan

Abstract

Acts of financial misconduct in business affect firms in many negative ways. Therefore, why do certain misdemeanants repeatedly commit these acts? We suggest that financial misdemeanants with different social networks will perceive the costs and benefits of committing financial frauds differently, thereby affecting the likelihood of committing financial frauds in the future. To be specific, we suggest that politically connected misdemeanants are less likely to recommit financial frauds, while misdemeanants at interlock network center are more likely to recommit financial frauds. In addition, we propose that misdemeanants are less likely to recommit financial frauds when their partners in the interlock network community are punished for financial frauds. To test our theory, we collected panel data from Chinese listed firms from 2005 to 2014 and employed event history analysis (EHA).

Suggested Citation

  • Bao, Fenghua & Zhao, Yapu & Tian, Longwei & Li, Yuan, 2019. "From Financial Misdemeanants to Recidivists: The Perspective of Social Networks," Management and Organization Review, Cambridge University Press, vol. 15(4), pages 809-835, December.
    • Handle: RePEc:cup:maorev:v:15:y:2019:i:4:p:809-835_8
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    Cited by:

    1. Liuyang Ren & Xi Zhong & Liangyong Wan, 2022. "Missing Analyst Forecasts and Corporate Fraud: Evidence from China," Journal of Business Ethics, Springer, vol. 181(1), pages 171-194, November.
    2. Zhong, Xi & Ren, Liuyang & Song, Tiebo, 2021. "Different effects of internal and external tournament incentives on corporate financial misconduct: Evidence from China," Journal of Business Research, Elsevier, vol. 134(C), pages 329-341.
    3. Dimitrios Kydros & Michail Pazarskis & Athanasia Karakitsiou, 2022. "A framework for identifying the falsified financial statements using network textual analysis: a general model and the Greek example," Annals of Operations Research, Springer, vol. 316(1), pages 513-527, September.
    4. Xi Zhong & Liuyang Ren & Tiebo Song, 2023. "To cheat when continuously missing aspirations: Does CEO experience matter?," Asia Pacific Journal of Management, Springer, vol. 40(2), pages 815-845, June.
    5. Chen, Fengwen & Wang, Bing & Wang, Wei & Hu, Chen, 2024. "The secret of imitating wrongdoing: Accidental or deliberate," Research in International Business and Finance, Elsevier, vol. 69(C).

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