Open Access
Subscription Access
Open Access
Subscription Access
Pervasiveness of Corporate Illegality:The Effects of Board of Directors Characteristics
Subscribe/Renew Journal
An ever-increasing rate of illegalities in the corporate world is a reason for concern and the most daunting global challenge. The advent of sophisticated technologies has facilitated the exploitation of regulatory loopholes by white collar criminals. Taking note of the economic crisis caused due to corporate failures, it is important to investigate the role played by corporate directors in thwarting such occurrences. With the help previous literature, this paper discusses the specific board aspects which are likely to have a significant effect on the occurrence of corporate illegality. A few research propositions are presented to understand the influence of the board of directors’ characteristics on the incidence of corporate illegality.
Keywords
Corporate Illegality, Board of Directors, Corporate Governance, Corporate Fraud.
Subscription
Login to verify subscription
User
Font Size
Information
- Abbott, L. J., Parker, S., & Peters, G. F. (2002). Audit Committee Characteristics and Financial Misstatement: A Study of the Efficacy of Certain Blue Ribbon Committee Recommendations. Working Paper. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=319125
- Abdullah, S. N. (2006). Board structure and ownership in Malaysia: The case of distressed listed companies. Corporate Governance: The International Journal of Business in Society, 6(5), 582 -594.
- Association of Certified Fraud Examiners. (2018). Report to the Nations: Global Study on Occupational Fraud and Abuse. Retrieved from https://s3-us-west-2.amazonaws.com/acfepublic/2018-report-to-the-nations.pdf
- Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review, 71(4), 443-465.
- Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Lapides, P. D. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons, 14(4), 441-454.
- Booth, J. R., & Deli, D. N. (1996). Factors affecting the number of outside directorships held by CEOs. Journal of Financial Economics, 40(1), 81-104.
- Chaganti, R. S., Mahajan V., & Sharma, S. (1985). Corporate board size, composition, and corporate failures in retailing industry. Journal of Management Studies, 22, 400-417.
- Chen, G., Firth, M., Gao, D. N., & Rui, O. M. (2006). Ownership structure, corporate governance, and fraud: Evidence from China. Journal of Corporate Finance, 12(3), 424 448.
- Clinard, M. B., & Quinney, R. (1986). Criminal behavior systems: A typology (2nd ed.) New York: Holt, Rinehart and Winston.
- Crutchley, C. E., Jensen, M. R., & Marshall, B. B. (2007). Climate for scandal: Corporate environments that contribute to accounting fraud. Financial Review, 42(1), 53-73.
- Daily, C. M., & Dalton, D. R. (1994). Bankruptcy and corporate governance: The impact of board composition and structure. Academy of Management Journal, 37(6), 1603-1617.
- D’Aveni, R. A. (1990). Top managerial prestige and organizational bankruptcy. Organization Science, 1(2), 121-142.
- De Andres, P., Azofra, V., & Lopez, F. (2005). Corporate boards in OECD countries: Size, composition, functioning and effectiveness. Corporate Governance: An International Review, 13(2), 197-210.
- Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research, 13(1), 1-36.
- Dunn, P. (2004). The impact of insider power on fraudulent financial reporting. Journal of Management, 30, 397-412.
- Edelhertz, H. (1970). The Nature, Impact and Prosecution of White-Collar Crime. Washington, DC: National Institute of Law Enforcement and Criminal Justice.
- Eisenhardt, K. M., & Bourgeois, L. J. (1988). Politics of strategic decision making in high-velocity environments: Toward a midrange theory. Academy of Management Journal, 31(4), 737-770.
- Fama, E. F. (1980). Agency problems and the theory of the firm. The Journal of Political Economy, 88(2), 288-307.
- Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The Journal of Law & Economics, 26(2), 301-325.
- Farrell, B. R., & Franco, J. R. (1999). The role of the auditor in the prevention and detection of business fraud: SAS No. 82. Western Criminology Review, 2(1), 1-12.
- Ferris, S. P., Jagannathan, M., & Pritchard, A. C. (2003). Too busy to mind the business? Monitoring by directors with multiple board appointments. The Journal of Finance, 8(3), 1087-1111.
- Fich, E. M., & Shivdasani, A. (2006). Are busy boards effective monitors?. The Journal of Finance, 61(2), 689-724.
- Geis, G. (1974a). Avocational crime. Handbook of Criminology, 273-98.
- Green, G. (1990). Occupational Crime. Chicago: Nelson Hall.
- Harris, I. C., & Shimizu, K. (2004). Too busy to serve? An examination of the influence of overboarded directors. Journal of Management Studies, 41(5), 775-798.
- Hazarika, S., Karpoff, J. M., & Nahata, R. (2012). Internal corporate governance, CEO turnover, and earnings management. Journal of Financial Economics, 104(1), 44-69.
- Hermalin, B. E., & Weisbach, M. S. (2003). Boards of directors as an endogenously determined institution: A survey of the economic literature (Digest Summary). Economic Policy Review, 9, 17-26.
- Hsu, H. H., & Wu, C. Y. H. (2014). Board composition, grey directors and corporate failure in the UK. The British Accounting Review, 46(3), 215-227.
- Jackling, B., & Johl, S. (2009). Board structure and firm performance: Evidence from India’s top companies. Corporate Governance: An International Review, 17(4), 492-509.
- Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880.
- Kesner, I. F., Victor, B., & Lamont, B. T. (1986). Research notes: Board composition and the commission of illegal acts: An investigation of Fortune 500 companies. Academy of Management Journal, 29(4), 789-799.
- Kim, J. Y., Roden, D. M. & Cox, S. R. (2013). The composition and compensation of the board of directors as predictors of corporate fraud. Accounting and Finance Research, 2(3), 142-154.
- Larcker, D., & Tayan, B. (2011). Corporate Governance Matters: A Closer Look at Organizational Choices and their Consequences. Pearson Education.
- Lipton, M., & Lorsch, J. W. (1992). A modest proposal for improved corporate governance. The Business Lawyer, 48(1), 59-77.
- Lorsch, J. W., & MacIver, E. (1989). Pawns or potentates: The reality of America’s corporate boards: Harvard Business School Press. Boston, MA.
- McKendall, M., Sánchez, C., & Sicilian, P. (1999). Corporate governance and corporate illegality: The effects of board structure on environmental violations. The International Journal of Organizational Analysis, 7(3), 201-223.
- Ndofor, H. A., Wesley, C., & Priem, R. L. (2013). Providing CEOs with opportunities to cheat the effects of complexity-based information asymmetries on financial reporting fraud. Journal of Management, 41(6), 1774-1797.
- Petra, S. T. (2005). Do outside independent directors strengthen corporate boards? Corporate Governance: The International Journal of Business in Society, 5(1), 55-64.
- Salleh, S. M., & Othman, R. (2016). Board of director’s attributes as deterrence to corporate fraud. Procedia Economics and Finance, 35, 82-91.
- Schrager, L. S. & Short, J. F. (1978). Toward a sociology of organizational crime. Social Problems, 25(4), 407-419.
- Shan, Y. G., Graves, C., & Hassan Ali, H. (2013). Effect of board composition and ownership characteristics on fraud Evidence from Malaysian listed companies. South East Asia Research, 21(2), 323-342.
- Sutherland, E. (1939). Principles of Criminology (3rd ed.). Philadelphia: Lippincott.
- Tricker, B. (1984). Corporate governance: Practices, Procedures and Powers in British companies and their boards of directors. London: Gower Publishing, Aldershot.
- Uzun, H., Szewczyk, S. H., & Varma, R. (2004). Board composition and corporate fraud. Financial Analysts Journal, 60(3), 33-43.
- Vafeas, N. (1999). Board meeting frequency and firm performance. Journal of Financial Economics, 53(1), 113-142.
- Wagner III, J. A., Stimpert, J. L., & Fubara, E. I. (1998). Board composition and organizational performance: Two studies of insider/outsider effects. Journal of Management Studies, 35(5), 655-677.
- Virk, G. K. (2017). The influence of board characteristics on corporate illegality. Journal of Financial Regulation and Compliance, 25(2), 133-148.
Abstract Views: 271
PDF Views: 0