| A consequence of corporate fraud studied in the literature is reputational penalty on the fraud firm. However, little is known about how a fraud firm loses its reputation after the fraud incident and why firms receive different levels of reputational penalty given the same level of fraud severity. Integrating literatures from criminology, finance, and social psychology, this dissertation conceptualizes firm reputation as stakeholders' (mainly shareholders here) sentiment toward the firm and a fraud incident as a trigger of shareholders' sentiment changes.;In this dissertation, I develop an integrated model that examines the sentiment changes of shareholders and sentiment restoration efforts made by the fraud firms. In the first study, I propose that corporate fraud violates shareholders' normative expectations and fundamental sentiments toward the fraud firm, which leads to shareholders' sentiment deflection and subsequently propels them to implement behavioral penalty on the fraud firm, that is, reputational penalty. During the process of sentiment deflection, shareholders tend to use the fundamental sentiment that they have adapted to as reference points to evaluate the fraud firm, depending on the salience of the fraud incident and the salience of the fraud firm. In the second study, I argue that the fraud firm can restore shareholders' sentiment and minimize its reputation loss by expressing restorative actions in public apology announcement. However, during the process of sentiment restoration, shareholders tend to adjust their evaluation of the firm based on the relative psychological distance of the restorative actions compared with that of the fraud cues and sentiment cues. The third study focuses on guilt sentiments of the fraud firm, which have been found to have long-term impact on the fraud firm by transforming their future behaviors. I propose that fraud firms that express guilt sentiments after fraud punishment are more likely to restrain from repeated fraudulent behaviors in the future. However, variations in punishment intensity, together with the fraud firms' direct and indirect punishment experiences, will influence their tendency to express guilt sentiments.;This dissertation aims to offer several contributions. First, by underscoring the importance of sentiment in the firm-shareholder relationship, it contributes to the corporate governance literature that mainly uses cognitive frameworks in the analysis. Second, it takes a sentiment approach to explore various biases embedded in shareholders' and the firm's evaluation of the informational cues that could influence their sentimental and behavioral reactions to the fraud incident, thus extending the corporate fraud literature that predominantly focuses on economics perspectives. Third, by examining the characteristics of firms' restorative actions and languages and their effects on shareholders' sentiment restoration and firm reputational repair, this dissertation contributes to the literatures of corporate turnaround and organizational-level impression management. Finally, it also contributes to the punishment literature by highlighting the internal transformation of the fraud firms, thus providing implications to stock exchange regulator and policy-makers in emerging economies.;Key words: sentiment, reputation, corporate fraud, punishment, restorative action. |
