Paying The Piper: An Empirical Examination Of Longer-Term Financial Consequences Of Illegal Corporate Behavior

Abstract

Longer-term performance effects of corporate illegality were investigated. Results show that firms experience lower accounting returns over five years and slower sales growth in the third through fifth year after a conviction. Stakeholders appear to paint all corporate wrong-doers with the same brush, ignoring the seriousness of illegalities, but responding strongly to multiple convictions for wrongdoing. Reduced financial performance does not deter subsequent illegality.