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Securities Fraud: An Economic Analysis

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This thesis develops an economic analysis of securities fraud. The thesis consists of a theory essay and an empirical essay. In the theory essay, I analyze a firm’s propensity to commit securities fraud and the real consequences of fraud. I show that fraud can lead to investment distortions. I characterize the nature of the distortions, and show that it results from fraud-induced market mispricing and management’s ability to influence the firm’s litigation risk through investment. The theory also characterizes the equilibrium supply of fraud. I demonstrate the linkages between a firm’s fraud propensity and the structure of its assets in place and growth options…

Author: Wang, Yue

Source: University of Maryland

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