SUNY Canton Researchers Say Investors Don’t Buy Bad Business
Corporate crime doesn’t pay for a company trying to gain or retain investors, according to two SUNY Canton faculty members’ research.
Professor Brian K. Harte, Ph.D., and Assistant Professor Umesh Kumar, Ph.D., recently received a best paper in session award at the Academy of Business Research fall international conference. Their presentation, “Investor Response to Convicted Firms Within and Outside of the United States,” examines stakeholders’ reaction to firms convicted of corporate wrongdoing.
Corporate crimes, even those committed outside of the United States result in a loss in investors’ confidence. These crimes also result in a loss of firm value in the long-term. This effect was found to be more significant when a firm is convicted for corporate crimes within the United States.
“Corporate crimes dent investors’ confidence severely,” Harte said. “It is important from an investors’ perspective to know whether or not a firm is convicted and the associated size of monetary penalties received for firms’ both inside and outside of the United States.”
Top global firms have been prosecuted and penalized for their corporate delinquency, including antitrust, fraud, environmental, health and safety laws, among other statutes. The researchers analyzed 127 businesses from the top global firms during 2001-2010.
“Our research shows that investors punish convicted firms by lowering equity premium,” Kumar said. “The higher the penalty imposed on firms convicted for crimes outside the United States, the higher the negative response is from investors.”
The two faculty members will be publishing their research at a later date.
About SUNY Canton
SUNY Canton is Northern New York’s premier college for career-driven bachelor’s degrees, associate degrees and certificate programs. The college delivers quality hands-on programs in engineering technology, health, management and public service. Faculty members are noted for their professional real-world experience in addition to outstanding academic credentials. SUNY Canton OnLine offers hundreds of flexible and convenient courses as well as eight exclusively online bachelor’s degrees. The college’s 14 athletic teams compete as provisional members of the NCAA Division III and the USCAA.