The Walls Have Ears: Local Information Environments and Corporate Fraud

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Abstract

This paper shows that a firm’s likelihood of committing corporate fraud is affected by the local information environment. We use the density of local bank branch networks as a proxy for the local information environment. We show that denser bank branch networks increase the likelihood of fraud detection, accelerate the detection of fraud, and decrease the fraud propensity of local firms. Our results cannot be explained by the clustering of firms in urban areas, geographic proximity to regulators, or other location effects. Overall, our study identifies a spatial dimension in the detection and prevention of corporate fraud.
Original languageEnglish
Pages (from-to)2377-2410
Number of pages34
JournalJOURNAL OF MONEY CREDIT AND BANKING
Volume54
Issue number8
Early online date22 Dec 2021
DOIs
Publication statusPublished - 8 Dec 2022

Keywords

  • corporate fraud
  • information environment
  • geographic proximity

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