Penalties of Corporate Misconduct

Conventional wisdom holds that financial misconduct is punished lightly. This view helped motivate the Sarbanes-Oxley Act of 2002, and it continues to drive public policy regarding corporate governance. A problem with this view, however, is that there is little evidence to back it up. This paper documents the consequences to individuals and firms affected by SEC enforcement actions for financial misrepresentation. The data indicate that legal penalties are common and frequently are large. For firms the largest penalties for misrepresentation are imposed by the market in the form of losses of reputation.Karpoff, Jonathan M. is the author of 'Penalties of Corporate Misconduct', published 2005 under ISBN 9780844771892 and ISBN 0844771899.