As part of the series of the „Finance Research Seminar“, VGSF welcomes Anastasia A Zakolyukina from Booth School of Business, University of Chicago to present her research paper.
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Paper
Fraud Culture
We develop a measure of the culture of fraud. The measure is constructed using machine learning to predict security class action lawsuits based on eight dimensions of corporate culture—adaptability, community, customer-oriented, detail-oriented, integrity, openness, results-oriented, and teamwork—computed from the text of employee reviews. The fraud culture measure combines dimensions of corporate culture in the most predictive way with the accuracy exceeding the predictive ability of firm size, growth, and profitability. Fraud culture mostly varies with openness, adaptability, and the extent to which culture is customer- and detail-oriented. Fraud culture is stable over time, although it has temporarily declined around the implementation of the Dodd-Frank Act. Fraud culture is slow to change. For CEO turnover, the potential for change is muted by matching; thereby CEOs join firms with the culture similar to their previous firm.
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