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Corporate Scandals and Household Stock Market Participation
Ist Teil von
The Journal of finance (New York), 2016-12, Vol.71 (6), p.2591-2636
Ort / Verlag
Cambridge: Blackwell Publishing Ltd
Erscheinungsjahr
2016
Link zum Volltext
Quelle
Wiley Online Library Journals Frontfile Complete
Beschreibungen/Notizen
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.