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An Empirical Analysis Of Market Reaction To Corporate Accounting Malfeasance

Author

Listed:
  • Liz Washington Arnold
  • Peter Harris

Abstract

This study examines corporate accounting malfeasance from an exploratory and empirical perspective for 100 companies to determine if there is an association between the Jenkins recommendations and SOX requirements and to determine if there are any differences between the internal and external monitoring characteristics of malfeasance and non-malfeasance companies. The exploratory perspective discusses the types of corporate malfeasance and gives an accounting and market dollar impact ($140 and $857 billion respectively) of 100 companies with publicly announced malfeasance and supports previous studies findings that revenue was the most common area of corporate malfeasance and theft was the least. The empirical study examined internal (corporate governance) and external (auditor and financial analysis) monitoring characteristics by matching the malfeasance companies with non-malfeasance companies. This empirical study did not find any significant differences in the monitoring characteristics of the companies even though these characteristics were chosen based on an examination of recommendations/requirements for business reporting for SOX and several accounting committees over the years. Previous studies indicated a difference.The research contributes to contemporary accounting literature by providing a dollar measurement of the accounting and related market impact for malfeasance companies and a systematic investigation testing monitoring characteristics between malfeasance and non-malfeasance companies.

Suggested Citation

  • Liz Washington Arnold & Peter Harris, 2012. "An Empirical Analysis Of Market Reaction To Corporate Accounting Malfeasance," Accounting & Taxation, The Institute for Business and Finance Research, vol. 4(1), pages 25-42.
    • Handle: RePEc:ibf:acttax:v:4:y:2012:i:1:p:25-42
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    References listed on IDEAS

    as
    1. Kinney, William Jr. & McDaniel, Linda S., 1989. "Characteristics of firms correcting previously reported quarterly earnings," Journal of Accounting and Economics, Elsevier, vol. 11(1), pages 71-93, February.
    2. Feroz, Eh & Park, K & Pastena, Vs, 1991. "The Financial And Market Effects Of The Secs Accounting And Auditing Enforcement Releases," Journal of Accounting Research, Wiley Blackwell, vol. 29, pages 107-142.
    3. Mason Gerety & Kenneth Lehn, 1997. "The causes and consequences of accounting fraud," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 587-599.
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    More about this item

    Keywords

    Accounting Restatements; Accounting Malfeasance; Corporate Malfeasance; SOX; Jenkins Report; Jenkins Recommendations.;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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