Corporate Scandals and Household Stock Market Participation

Giannetti, MariassuntaStockholm School of Economics,Handelshögskolan i Stockholm (författare)

LIBRIS-ID:oai:hhs.se:1154991480006056
https://research.hhs.se/esploro/outputs/journalArticle/Corporate-Scandals-and-Household-Stock-Market/991001479432806056URI
https://doi.org/10.1111/jofi.12399DOI

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.

Ingår i:Journal of Finance: Wiley: No OnlineOpen71:6, s. 2591-26361540-62610022-1082

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