FCPA violations; capital markets reaction; revised analysts’ opinions; economic penalties; reputational penalties
Academic models grounded in market efficiency and reputational principles argue that market firms value suffer investors punishment as consequence of international bribery allegations. However, there are indicators of potential mispricing when authorities reveal the details of the allegations. To reconcile this phenomenon, this research theorizes the influence of analysts revised expectations as moderators and/or mediators of the relationship between the reputational and economic penalties, and investors’ response. Findings from 124 documented cases (2007 to 2018) suggest that analysts positively moderate (not mediate) the relationship concerning reputational (not economic) penalties and stock returns in the short-term after the press release (three-day window). These results potentially explains the mispricing and the accentuated reputational penalties (over the economic penalties) to stockholders’ returns. Several statistical and theoretical procedures robust the quality of the findings.
Journal of Forensic and Investigative Accounting
Jimenez-Andrade, J. R., Fogarty, T. J., & Jonas, G. A. (2021). Counselors, Judges, or Executioners: The Role of Financial Analysts in Capital Markets’ Responses to Alleged FCPA Violations. Journal of Forensic and Investigative Accounting, 13 (3) Retrieved from https://digitalcommons.tamusa.edu/acct_faculty/3