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- Giannetti, Mariassunta, et al.
(author)
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Corporate Scandals and Household Stock Market Participation
- 2016
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In: Journal of Finance. - : Wiley: No OnlineOpen. - 1540-6261 .- 0022-1082. ; 71:6, s. 2591-2636
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Journal article (peer-reviewed)abstract
- We show that, after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease holdings in fraudulent as well as nonfraudulent firms, even if they do not hold stocks in fraudulent firms. Within a state, households with more lifetime experience of corporate fraud hold less equity. Following the exogenous increase in fraud revelation due to Arthur Andersen's demise, states with more Arthur Andersen clients experience a larger decrease in stock market participation. We provide evidence that the documented effect is likely to reflect a loss of trust in the stock market.
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