CEO Wrongdoing: A Review of Pressure, Opportunity, and Rationalization

Wrongdoing, and specifically that which is committed by top executives, has attracted scholars for decades for a number of reasons. Among them, the consequences of wrongdoing are widespread for organizations and the people in and around them. Due to the vast array of consequences, there continues to be new questions and additional scholarly attempts to uncover why it occurs. In this review, we build upon previous efforts to synthesize the body of literature regarding the antecedents of CEO wrongdoing utilizing a framework that sheds light on the status of the literature and where unanswered questions remain. We apply the Fraud Triangle, a framework drawn from the accounting literature, to derive conclusions about what we know about the pressures faced by CEOs, the opportunities afforded to CEOs to commit wrongdoing, and contributing factors to a CEO's ability to rationalize misbehavior. We organize the literature on these conceptual antecedents of CEO wrongdoing around internal (e.g., compensation structure and organizational culture) and external (e.g., shareholder pressure and social aspirations) forces. In doing so, we integrate findings from a variety of disciplines (i.e., accounting, finance, and sociology) but remain focused on management scholarship since the last review of organizational wrongdoing to provide an updated state of the literature. This review offers a clear framework and a common language;it highlights gaps in the literature and specific directions for future research with the ultimate goal of understanding why CEOs engage in wrongdoing

Bank Privatization in Hungary and the Magyar Kulkereskedelmi Bank Transaction

http://deepblue.lib.umich.edu/bitstream/2027.42/39395/3/wp3.pd

Regulatory and Governance Impacts on Bank Risk-Taking

Risk in financial institutions is vitally important to regulators, policy makers, investors, and the stability of the financial system, yet some critical aspects of that risk remain poorly understood. In the case of U.S. startup banks, a critical choice that can influence risk-taking behavior is which of three regulators—with varying levels of stringency—to choose. The board of directors of the new bank makes this important decision, which may result in different risk implications, depending on board’s structure. Here, we examine banks’ risk behavior associated with the degree of board independence and the choice of regulator. We find that the regulatory environment and board independence jointly influence new bank risk. Our evidence suggests that the intensity of regulatory scrutiny is a partial substitute for board independence in achieving an optimal level of risk. We discuss the implications of our findings for theory and policy

Antecedents of New Director Social Capital

Prior research shows that firms benefit from the social capital of their boards of directors but has not explored the antecedents of new director social capital. We argue that firms can attract directors with social capital by offering more compensation. We also argue that more complex firms (firms with a greater scale and scope of operations) are more attractive to such directors because of the greater experience and exposure that such directorships provide. Similarly, we argue that firms with high-status directors on their current boards will be more attractive to directors with social capital. We analyse the social capital of new outside directors added to boards of semiconductor firms between 1993 and 2007. Surprisingly, we find no support for the hypothesis that higher compensation is associated with adding directors with high status or board ties. However, firm complexity is associated with the ability to add new directors who have social capital, and the status of current board members is associated with the ability to add new directors who also have high status

Internal corporate governance as a source of firm value: The impact of internal governance on the incidence of white collar crime.

White collar crime can cost firms from 2--5% of their sales annually. The magnitude of the loss is significant, and there is little research into how to reduce this loss. Any solution to this problem must originate within the firm. This study begins the investigation of governance structures and their ability to impact the occurrence of white collar crime. Governance can be external, as in the structure of ownership, the Board of Directors or the CEO, or it can be internal, as in the policies and procedures, the accounting system and the employee compensation of the firm. This study creates a framework relating external and internal governance to the occurrence of white collar crime. This study adopts a holistic and multi-variable approach to governance building on agency and organizational theories. Firms that have announced a white collar crime from 1987--1998 form the basis of the sample. Each of these firms is then matched with a firm similar in size and scope, but from the year prior to the announcement. Governance variables are gathered from documents filed with the Securities and Exchange Commission (SEC) including the annual report, 10K and proxy statement for all of these firms. The final sample is 72 'crime firms' and 72 'non-crime firms'. First the level of value loss is investigated. Results indicate that the value loss over a three day window around the announcement day are statistically but not economically significant, representing about 1% of firm market value. However, when actual future performance is investigated, the commission of a crime has a negative and significant effect on return on assets (ROA) in the year following the crime, and more crimes generate significant negative ROA for three years following the crime. Discriminant analyses indicate that firms with crime and firms without crime have significantly different governance structures, and subsequent logit and regression tests indicate that firms with fewer crimes have stronger policies and procedures and stronger liaison roles. The firms with fewer crimes may also have more employee contingent pay, higher morale, Boards paid with contingent compensation, fewer insiders on the Audit committee, and less Board ownership. Prior performance has little to do with the probability of occurrence of a crime.Ph.D.ManagementSocial SciencesUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/126489/2/3016956.pd

Institutional Investors and Institutional Environment: A Comparative Analysis and Review

We provide a review of the literature surrounding institutional investor classifications, and we extend this research by examining the aforementioned classification systems and relate this to the three predominant financial systems (market-based, family-centred, and bank-centred systems). After integrating this literature we propose that future research can contribute to the corporate governance field in three main ways: through improved measurement of the central constructs, through more complex research designs (through moderated and/or longitudinal relationships), and through asking new types of questions. We suggest several questions and approaches for future research on institutional investors and their interrelationship with country financial systems. Copyright (c) 2010 The Authors. Journal of Management Studies (c) 2010 Blackwell Publishing Ltd and Society for the Advancement of Management Studies.