Criminal convictions and risk taking

Eli Amir*, Juha Pekka Kallunki, Henrik Nilsson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

An analysis of a proprietary dataset reveals that non-trivial proportions of directors, Chief Executive Officers (CEOs) and Chief Financial Officers in Swedish listed companies have been convicted or suspected of crimes. Based on prior literature, we argue that directors and senior executives who have been convicted or suspected of crimes are more prone to take risk. Consistent with this argument, we find that firms with more criminally convicted/suspected directors and CEOs report more volatile earnings, engage more in goodwill writeoffs due to more unsuccessful acquisitions, and recognize bad news in earnings in a less timely manner. We also find that these firms are, on average, smaller and less profitable. These findings highlight the role personal characteristics of directors and senior management play in managerial decisions.

Original languageEnglish
Pages (from-to)497-523
Number of pages27
JournalAustralian Journal of Management
Volume39
Issue number4
DOIs
StatePublished - 24 Nov 2014

Keywords

  • Accounting conservatism
  • corporate governance
  • criminal convictions
  • earnings volatility
  • goodwill writeoffs
  • risk

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