Effect of corporate misconduct on financial performance and mitigating effects of corporate governance.
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2025-07-04
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en
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History has taught us that misconduct can have serious consequences, including reputational damage and financial problems. Prior research has mostly been focused on studying the bivariate relationships between misconduct, financial performance, and corporate governance. This thesis investigates how these concepts are interrelated, investigating the financial consequences of misconduct in a sample of 124 U.S. companies and how corporate governance mediates this effect. Each company is matched with a similar company that was not involved in misconduct during the same period.
Contrary to the expectations, the regression analyses showed a statistically significant, positive effect of misconduct on CAR across different models. This could suggest that investors see the fines as minor/lower than expected or investors being relieved that there has come an end to an era of uncertainty. Governance mechanisms play a role in moderating this effect, the presence of CEO duality has a statistically significant, negative interaction term across different models. When looking at a different measure of financial performance, in this case the average ROA, the aforementioned effects do not apply anymore. This suggests that the results of this thesis depend on the measure of financial performance, where the results are more prevalent when focusing on stock market reactions.
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Faculteit der Managementwetenschappen