Cheating in plain sight: Big, well-known companies are more likely to commit financial fraud

Financial securities fraud is not usually, it turns out, a cloak-and-dagger accounting scheme hatched in the closet of a company you’ve never heard of. It’s happening in plain sight, at big-name Fortune 500 companies.

Researchers from a trio of universities (Washington State, Pennsylvania State, and Miami) studied 250 companies involved in Securities and Exchange Commission fraud filings from 2005 to 2013, and found that Fortune 500 companies were much more likely to have cooked books. Researchers looked closely for predictors of fraud, and found four risk factors :

  • Fortune 500 companies (four times more common than non-Fortune 500 companies)
  • Firms traded on the New York Stock Exchange (two times more likely than those not)
  • Companies with unusually aggressive growth expectations
  • Firms where the CEO also chairs the board

When companies illegally manipulate financial markets in their favor, it’s called securities fraud. Commonly, investors are provided false information.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s