TY  - JOUR
AU  - Davidson, Robert
AU  - Dey, Aiyesha
AU  - Smith, Abbie J
TI  - Executives' "Off-The-Job" Behavior, Corporate Culture, and Financial Reporting Risk
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18001
PY  - 2012
Y2  - April 2012
DO  - 10.3386/w18001
UR  - http://www.nber.org/papers/w18001
L1  - http://www.nber.org/papers/w18001.pdf
N1  - Author contact info:
Robert Davidson
Georgetown University
McDonough School of Business
Rafik Hariri Building
37th and O Streets, NW
Washington, DC 20057
E-Mail: rhd22@georgetown.edu

Aiyesha Dey
University of Minnesota
Carlson School of Management
321 - 19th Avenue South
Minneapolis, MN 55455
E-Mail: deya@umn.edu

Abbie Smith
University of Chicago Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
E-Mail: abbie.smith@chicagobooth.edu
M1  - published as Robert Davidson, Aiyesha Dey, Abbie Smith. "Executives' "Off-The-Job" Behavior, Corporate Culture, and Financial Reporting Risk," in Luigi Zingales and James Poterba, organizers, "Causes and Consequences of Corporate Culture" Elsevier, Journal of Financial Economics 117(1) (2015)

M3  - presented at "Causes and Consequences of Corporate Culture", December 8-9, 2011
AB  - We examine how executives' behavior outside the workplace, as measured by their ownership of luxury goods (low "frugality") and prior legal infractions, is related to financial reporting risk. We predict and find that CEOs and CFOs with a legal record are more likely to perpetrate fraud. In contrast, we do not find a relation between executives' frugality and the propensity to perpetrate fraud. However, as predicted, we find that unfrugal CEOs oversee a relatively loose control environment characterized by relatively high probabilities of other insiders perpetrating fraud and unintentional material reporting errors. Further, cultural changes associated with an increase in fraud risk are more likely during unfrugal (vs. frugal) CEOs' reign, including the appointment of an unfrugal CFO, an increase in executives' equity-based incentives to misreport, and a decline in measures of board monitoring intensity.
ER  -