Shareholder wealth effects of corporate fraud: Evidence from Taiwan’s securities investor and futures trader protection act

Abstract

We examine the shareholder wealth effects of Taiwanese firms accused of corporate fraud, and we find evidence that shareholders benefited from the passage of Taiwan’s Securities Investor and Futures Trader Protection Act. We not only examine the shareholder wealth effects at different stages of the corporate fraud violation cycle, but we also find evidence of a filing effect and an industry spillover effect. We conclude that shareholders can benefit from external monitoring of the firm’s managers, particularly in cases when firms operate in environments with weaker internal governance mechanisms.