Corporate Fraud, Governance, and Auditing

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Oxford Journals Contact Us My Basket My Account Review of Corporate Finance Studies About This Journal Contact This Journal Subscriptions View Current Issue (Volume 2 Issue 1 March 2013) Archive Search Oxford Journals EconomicsSocial Sciences Review of Corporate Finance Studies Volume 1 Issue 1 Pp. 109-133. Corporate Fraud, Governance, and Auditing Marco Pagano

Università di Napoli Federico II, CSEF, EIEF, and Imperial College Giovanni Immordino

Università di Salerno and CSEF Send correspondence to Marco Pagano, CSEF, Facoltà di Economia, Università di Napoli Federico II, Via Cintia, 80126 Napoli, Italy; telephone: +39-081-675309; fax: +39-081-7663540. E-mail: mrpagano{at}tin.it. Abstract We analyze corporate fraud in a setting in which managers have superior information but are biased against liquidation because of their private benefits from empire building. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To curb fraud, shareholders optimally design corporate governance by jointly choosing audit quality and managerial compensation. We analyze how country-level rules affect these firm-level choices. Our analysis underscores that different country-level governance provisions have different effects on firm-level governance: Some act as substitutes of internal governance mechanisms, whereas others enhance their effectiveness and therefore complement them. (JEL G28, K22, M42)

© The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com. « Previous | Next Article » Table of Contents This Article Review of Corporate Finance Studies (2012) 1 (1): 109-133. doi: 10.1093/rcfs/cfs001 First published online: June 22, 2012 » Abstract Full Text (HTML) Full Text (PDF) All Versions of this Article: cfs001v1 1/1/109 most recent Classifications Articles Services Alert me when cited Alert me if corrected Find similar articles Similar articles in Web of Science Add to my archive Download citation Request Permissions Citing Articles Load citing article information Citing articles via CrossRef Citing articles via Scopus Citing articles via Web of Science Citing articles via Google Scholar Google Scholar Articles by Pagano, M. Articles by Immordino, G. Search for related content Related Content Load related web page information Share Email this article CiteULike Delicious Facebook Google+ Mendeley Twitter What's this?

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