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      Who Pays for White-Collar Crime?
      22 Jul 2016Working Paper Summaries

      Who Pays for White-Collar Crime?

      by Paul Healy and George Serafeim
      Punishments of white-collar crime are systematically related to perpetrator, transaction, and company characteristics. This variation is consistent with executives determining appropriate punishments by an economic analysis of costs and benefits. Even so, senior male executives receive lighter punishments than female peers, for example. These and other variations suggest that not all decisions about punishment are taken with shareholders’ interests in mind: The self-interest of host company executives is also an important consideration.
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      Author Abstract

      Using a proprietary dataset of 667 companies around the world that experienced white-collar crime, we investigate what drives punishment of perpetrators of crime. We find a significantly lower propensity to punish crime in our sample, where most crimes are not reported to the regulator, relative to samples in studies investigating punishment of perpetrators in cases investigated by United States regulatory authorities. Punishment severity is significantly lower for senior executives, for perpetrators of crimes that do not directly steal from the company, and at smaller companies. While economic reasons could explain these associations, we show that gender and frequency of crimes moderate the relation between punishment severity and seniority. Male senior executives and senior executives in organizations with widespread crime are treated more leniently compared to senior female perpetrators or compared to senior perpetrators in organizations with isolated cases of crime. These results suggest that agency problems could partly explain punishment severity.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: June 2016
      • HBS Working Paper Number: 16-148
      • Faculty Unit(s): Accounting and Management
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      Paul M. Healy
      Paul M. Healy
      James R. Williston Professor of Business Administration
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      George Serafeim
      George Serafeim
      Charles M. Williams Professor of Business Administration
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