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The Impact of Illegal Business Practice on Shareholder Returns
Author(s) -
Reichert Alan K.,
Lockett Michael,
Rao Ramesh P.
Publication year - 1996
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1996.tb00864.x
Subject(s) - indictment , shareholder , index (typography) , accounting , business , economics , finance , corporate governance , law , political science , world wide web , computer science
Data regarding illegal firm behavior were obtained for the period 1980–1990. Using the single index market model, the study finds that public announcements of indictments for major corporate crimes have a significant and long‐term negative impact upon shareholder wealth, particularly for firms found guilty of the indictment. The results indicate that indictments of larger firms have a proportionally smaller impact on excess returns. Furthermore, indictments handed down since the Levine/Boesky scandal appear to have had a more adverse impact.