Corporate scandals and household stock market participation

• Autores: MARIASSUNTA GIANNETTI, Tracy Yue Wang
• Localización: The Journal of finance, ISSN 0022-1082, Vol. 71, Nº 6, 2016, págs. 2591-2636
• Idioma: inglés
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• Resumen

  • 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. [ABSTRACT FROM AUTHOR]