Abstract
While past theory and research has highlighted the damaging effect that being involved in a fraudulent event can have on a director’s reputation and future board prospects, in the current study we examine whether serving on a board through a fraud event provides directors with experience that proves to be highly beneficial for the subsequent boards on which they serve. That is, we propose that fraud experience equips directors with requisite expertise to be an effective monitor with respect to preventing fraud at the firms at which they serve in the future. As such, we predict that the presence of fraud-experienced directors on firms’ boards is related to a lower likelihood of fraud occurring at such firms as compared to firms without such directors on their boards. We tested our hypothesis on a sample of firms who had committed fraud (‘fraud firms’) matched with similar peers who had not committed fraud (non-fraud firms) during the study period of 2010-2019.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.