The Geography of Financial Misconduct
NBER Working Paper No. 20347
We find that a firm's tendency to engage in financial misconduct increases with the misconduct rates of neighboring firms. This appears to be caused by peer effects, rather than exogenous shocks like regional variation in enforcement. Effects are stronger among firms of comparable size, and among CEOs of similar age. Moreover, local waves of financial misconduct correspond with local waves of non-financial corruption, such as political fraud.
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Document Object Identifier (DOI): 10.3386/w20347