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The secret of imitating wrongdoing: Accidental or deliberate

Author

Listed:
  • Chen, Fengwen
  • Wang, Bing
  • Wang, Wei
  • Hu, Chen

Abstract

This study investigates the drivers of financial misconduct imitation, an important aspect of its prevention and detection. Using a sample of Chinese listed firms from 2007 to 2021, we introduce an innovative method for identifying each focal firm’s product-based peer firms. Empirical results reveal that firms involved in financial misconduct frequently imitate their product-based peers’ misdeeds. We explore financial misconduct imitation further, distinguishing between information-driven and rivalry-driven motivations, to determine whether the imitation is accidental or deliberate. For information-driven motivations, focal firms perceive product-based peers’ misconduct as signaling private information, especially when managers receive lower compensation or lack international experience. External oversight mechanisms, including accounting firm and analyst coverage, impact the financial misconduct imitation. For rivalry-driven motivations, a firm’s comparative advantage and relative profitability significantly impact its propensity to mimic misbehavior, particularly among peers with fewer financial constraints. Our findings emphasize the prevalence of misconduct imitation among economically related firms.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000722
    DOI: 10.1016/j.ribaf.2024.102279
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    More about this item

    Keywords

    financial misconduct; imitation; peer firms; product-related links; social learning;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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