Finance Webinar（2021-01)

Topic: The SEC's Deterrence Effect on Corporate Fraud

Speaker: Botong Shang, University of Rochester

Time: Monday, 04 January,10:00-11:30 AM Beijing Time

Location: Microsoft Teams Online Conference Room

Abstract:

I develop and estimate, using hand-collected data, a game-theoretic model of strategic corporate fraud, that incorporates and quantifies firms' adjustments in fraud propensities in response to regulators' information processing capacity. The findings are economically significant. A one standard deviation change in different regulatory interventions is associated with an annual increase of 10 to 58 fraudulent cases. I exploit the 2005 option backdating scandal as an exogenous shock to regulatory attention, and find further support for both the opportunism in fraud and the deterrence effect. I document that fraudulent behavior is heterogeneous in executive incentives and firm complexity.

Introduction:

Botong Shang is currently a Ph.D. candidate in finance at the Simon Business School, University of Rochester, expecting to graduate in 2021. Her research focuses on information economics within the field of empirical finance, with an emphasis on strategic interaction. In her job market paper, Botong estimates a game-theoretic model of strategic corporate fraud to explore the importance of regulatory information processing capacity for firms’ fraud decisions. Botong was also educated at the Ohio State University, receiving MSc and BA degrees.

Your participation is warmly welcomed!