An “American Dream” theory of corporate executive Fraud (2023)

We promote awareness of the features of emails that propose advanced fee fraud schemes. These are commonly known as 419 emails (after Section 419 of the Nigerian Penal Code). We outline the structural features of 419 emails and conduct a preliminary study of their distinctive linguistic features, using word frequency counts and DICTION text analysis software. We find that the incidence of first person singular pronouns is seven times greater in 419 emails than non-419 emails. We suggest elements of a future research agenda that can build on our preliminary results to help reduce advanced fee fraud.

Fraud is increasing with frequency and severity. In this paper, I explore the assertion of the fraud triangle as a useful practitioner framework employed to combat fraud. This paper is anchored through Fairclough's critical discourse theory, and is supported with evidence from three accounting fraud cases. The findings indicate that the Association of Certified Fraud Examiner's (ACFE) perpetuates a discourse that presents a restricted version of fraud. Fraud is a multifaceted phenomenon, whose contextual factors may not fit into a particular framework. Consequently, the fraud triangle should not be seen as a sufficiently reliable model for antifraud professionals.

We suggest that when using the fraud triangle, academics and professionals should take account of the insights gleaned from our study, in which Switzerland and Austria's “elite” white-collar offenders with high professional standing and respectability were interviewed. Our perpetrators consider that only opportunity is a universal precondition of acts defined by others as fraud, though perceived pressure is salient to most frauds. By contrast, financial incentives are not required to be motivational elements. The frequently cited “rationalisation” is too simplistic: rather, a fraud-inhibiting inner voice before the crime and a guilty conscience after it were present among those interviewed.

Accounting, Organizations and Society, Volume 66, 2018, pp. 14-28

Research shows that audit partner leadership is critical to achieving fraud brainstorming objectives. We examine how partner leadership and subordinate knowledge jointly influence brainstorming processes and outcomes. We conduct a natural field experiment that manipulates partner leadership during actual brainstorming sessions to leverage naturally-occurring differences in the knowledge levels of managers versus seniors. Our design allows us to examine how knowledge differences within the organization influence judgments on actual engagements, thereby facilitating uniquely realistic inferences about partner leadership in interactive brainstorming. We predict and find that quality-differentiated leadership improves the mental representations of fraud risk for seniors, but not managers. Consistent with theory around shared mental models, these changes are, in turn, associated with the engagement team's planned fraud risk responses. Further analyses reveal that our leadership prompts are relatively more novel for seniors than managers, supporting the notion that seniors have more room for improvement in their mental representations than managers.

Procedia Economics and Finance, Volume 28, 2015, pp. 102-106

In recent years, the focus on good governance and control mechanisms has increased significantly due to the number of high-profile corporate failures caused by top management fraudulent acts. Recent fraud cases reflect the deceptive “tone from the top”, even though the organisation had reported good governance and control systems. This research analysed the importance of the perceived management support and its effect on the organisation culture during a fraud risk assessment. The study used Action Research as the researcher intended to have a more in-depth study on the factors affecting organisational fraud.

Accounting, Organizations and Society, Volume 79, 2019, Article 101070

We examine the influence of rationalization on NYC taxi drivers’ decisions to cheat their customers. We find that cheating ramps up by an order of magnitude when taxi drivers are in settings where it is easier for them to view cheating as acceptable as opposed to dishonest. This finding provides field evidence support for the idea that self-concept maintenance plays an important role in preventing fraud, and that fraud in economic exchange multiplies when participants can rationalize cheating in a way that precludes it from affecting their self-concept.

Emerging Markets Review, Volume 38, 2019, pp. 142-158

Does mutual fund investment deter accounting fraud? Using a bivariate probit model, this study examines the relationship between mutual funds and accounting fraud between 2007 and 2014. We observed mutual fund investment has significantly higher levels of fraud detection, reducing firms' propensity to commit fraud. This validates Chinese regulators' efforts to develop mutual funds to address accounting fraud. Open-end mutual funds outperform closed-end mutual funds in detecting accounting fraud and reducing fraud commission; redeemable shares appear to discipline managers. This effect is moderated by state ownership of listed firms: mutual funds cannot effectively detect fraud in state-owned firms.

Journal of Corporate Finance, Volume 69, 2021, Article 102024

We examine three information channels through which product market interactions in an industry can affect firms' incentives to misreport financial information to investors. We find that lower product market sensitivity to individual firms' information and greater use of relative performance evaluation encourage the commission of financial fraud. Industry structures that give rise to less collection of information about individual firms decrease the probability of fraud detection and increase the probability of fraud commission. We also examine dynamic effects of fraud. Our results suggest that, in fragmented industries, fraud can amplify cyclical fluctuations in the real economy.

Pacific-Basin Finance Journal, Volume 63, 2020, Article 101404

This study investigates the impact of CFO gender on financial-reporting-related corporate fraud. Building on findings in psychology and sociology that women are more risk-averse and ethical than men, we hypothesize that firms with female CFOs are less likely to commit risky and unethical fraud than otherwise similar firms with male CFOs. Our findings, based on a sample of Chinese listed firms from 2004 to 2014, provide support for our prediction. Further, we find that the negative association is more pronounced when female CFOs have higher levels of education and/or external job opportunities. These findings hold true in a battery of robustness checks.