This article presents an economic model of corporate fraud arising from shareholder incentives. First, the model shows …

risk of corporate fraud. Appointment-based CEO connectedness in executive suites and boardrooms increases the likelihood of … committing fraud and decreases the likelihood of detection. Additionally, it decreases expected costs of fraud by helping to … conceal frauds, making CEO dismissal less likely upon fraud discovery, and lowering the coordination costs of carrying out …

Although securities fraud ... …

We examine the effect of insider share pledges on corporate fraud. We find a positive, causal relation between share … pledges by controlling shareholders and detected corporate fraud. Firms whose controlling shareholders pledge have longer … fraud detection cycles and receive lighter punishments. Firms with pledging controlling shareholders who hold pledging …

We estimate what percentage of firms engage in fraud and the economic cost of fraud. Our estimates are based on … detected frauds, and frauds that we infer are started but are not caught. To identify the ‘iceberg' of undetected fraud we take … advantage of an exogenous shock to the incentives for fraud detection: Arthur Andersen's demise, which forces companies to …

Most securities fraud cla ... …

The paper provides a cost-based explanation for decision makers' reluctance to use fraud prediction models …, particularly as these models have nearly doubled their success at identifying fraud (true positive rates) when compared to the … initial models in Beneish (1997, 1999). We estimate the costs of fraud prediction errors from the perspective of auditors …

We examine the deterrence effect of whistleblower laws on accounting fraud. We exploit state False Claims Acts (FCAs …), under which reporting fraud at a firm invested in by a state's pension fund can result in monetary rewards from that state …'s government. Using staggered adoption of FCAs between 2001 and 2010, we compare the accounting fraud probability of firms owned by …