The Walls Have Ears: Local Information Environments and Corporate Fraud

Hagendorff, J.; Le, N.; Nguyen, D.D.

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.

Citation

Hagendorff, J., Le, N., & Nguyen, D. (2022). The Walls Have Ears: Local Information Environments and Corporate Fraud. Journal of Money, Credit and Banking, 54(8), 2377-2410. https://doi.org/10.1111/jmcb.12906

• Journal Article Type: Article
• Acceptance Date: Dec 7, 2020
• Online Publication Date: Dec 22, 2021
• Publication Date: 2022-12
• Deposit Date: Sep 9, 2021
• Publicly Available Date: Dec 23, 2023
• Journal: Journal of Money, Credit and Banking
• Print ISSN: 0022-2879
• Electronic ISSN: 1538-4616
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 54
• Issue: 8
• Pages: 2377-2410
• DOI: https://doi.org/10.1111/jmcb.12906
• Public URL: https://durham-repository.worktribe.com/output/1251029