| This study examines the different roles that individuals and organizations play in securities fraud. It develops and tests an integrated conceptual model that combines factors at both individual and organizational levels. A longitudinal design, via hierarchical linear models, is also integrated into the model to simultaneously examine individual corporate change over time from 1996 to 2001 and to compare different corporations on average. Data were collected on a sample of 177 of the largest American companies against which securities fraud allegations were made during the study period according to the Stanford Law School Securities Class Action Clearinghouse Dataset. Fraud status for each company in each fiscal year is investigated on the basis of allegations and court decisions in motion hearing for each fraud case. Corporations' financial and governance data provide executive compensation and corporate governance information for the study. Evidence is found linking executive incentive compensation, for both individual CEOs and top executives as a group, to securities fraud. Analyses also show that a complex set of dynamics of corporate governance may play a role in fraud control. Findings vary, however, depending on the stages of judicial proceedings at which securities fraud class action cases were examined. The theoretical and policy implications of these findings are discussed. |
