What is Forensic Finance?

Abstract

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potentiallyWe survey a growing field studying aspects of finance that are illegal, illicit, or immoral. Some of the literature is investigative in nature to uncover malfeasance that is recent and possibly ongoing. Other forensic finance research examines past events to generate a fuller understanding of the activities, economic magnitudes, incentives, and players involved. The work spans newer areas such as cryptocurrencies, financial advisor and broker misconduct, and greenwashing; and newer research in established fields that are still developing, such as insider trading, structured finance, market manipulation, political connections, public finance, and corporate fraud. We highlight investigative forensic finance, common economic questions, common empirical methods, industry and political opposition, censoring, and the importance of avoiding publication biases. Compared to other finance papers, forensic work has similar citations and SSRN downloads, and more media and Securities and Exchange Commission (SEC) citations. Along with prominent examples of industry reform and awareness, this highlights the potential for real-world impact. By laying out commonalities in research themes, questions, methods, and approaches across fields that may at first seem disparate, we hope to encourage more investigation of incentives and mechanisms in darker corners of finance.