Title: The reputational penalty firms bear from committing criminal fraud
Abstract:Optimal penalties for corporate fraud require that firms face expected penalties equal to the total social costs of the crime. Yet formal courtimposed sanctions for committing fraud often represent a ...Optimal penalties for corporate fraud require that firms face expected penalties equal to the total social costs of the crime. Yet formal courtimposed sanctions for committing fraud often represent a small fraction of the damage produced by the fraud. Sheer and Ho (1989), for example, estimate that the median and mean ratios of criminal fines to the private loss from private fraud were 0.14 and 0.73 in 1988. The corresponding median and mean ratios for government procurement fraud were 0.29 and 1.60. Including criminal restitution raises the median dollar sanction-to-loss ratio for private fraud to 0.84 and for government procurement fraud to 0.68. These ratios are for private parties convicted of fraud. The ratio of the expected court-imposed penalty to the social cost of the fraud is undoubtedly smaller. Particularly when compared to other crimes such as environmental pollution, where the median ratio of criminal fines to private loss is 3.71, the penalty for fraud seems surprisingly low.Read More
Publication Year: 1996
Publication Date: 1996-02-23
Language: en
Type: book-chapter
Indexed In: ['crossref']
Access and Citation
Cited By Count: 413
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