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Booms, Busts, and Fraud

Author

Listed:
  • Paul Povel
  • Rajdeep Singh
  • Andrew Winton

Abstract

Firms sometimes commit fraud by altering publicly reported information to be more favorable, and investors can monitor firms to obtain more accurate information. We study equilibrium fraud and monitoring decisions. Fraud is most likely to occur in relatively good times, and the link between fraud and good times becomes stronger as monitoring costs decrease. Nevertheless, improving business conditions may sometimes diminish fraud. We provide an explanation for why fraud peaks towards the end of a boom and is then revealed in the ensuing bust. We also show that fraud can increase if firms make more information available to the public. , Oxford University Press.

Suggested Citation

  • Paul Povel & Rajdeep Singh & Andrew Winton, 2007. "Booms, Busts, and Fraud," The Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 1219-1254.
    • Handle: RePEc:oup:rfinst:v:20:y:2007:i:4:p:1219-1254
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    File URL: http://hdl.handle.net/10.1093/rfs/hhm012
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    3. Persons, John C & Warther, Vincent A, 1997. "Boom and Bust Patterns in the Adoption of Financial Innovations," The Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 939-967.
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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