Director Gender and Social Status in White-Collar Crime: Evidence from Accounting and Enforcement Releases from the SEC Paula M.
Citation:Paula Bolger, 'Director Gender and Social Status in White-Collar Crime: Evidence from Accounting and Enforcement Releases from the SEC Paula M.'
FINAL MASTER PHD PAULA BOLGER.pdf (PDF) 5.088Mb
This thesis aims to re-establish the long-standing conjecture that white collar criminals differ from ordinary street criminals based on the high social status and gender of the offenders. I formulate theory and set forth a first-ever empirical analysis of the impact of board of director social status and gender diversity on the broad spectrum of fraudulent financial reporting (FFR) involvement in U.S. listed companies, generating three main insights. Using a unique data set of 477 fraudulent directors manually extracted from Accounting and Auditing Enforcement Releases (AAERs) issued by the Securities and Exchange Commission (SEC) between 1998 through 2014. First, I examine whether high social status and gender of the corporate elite impacts the probability of FFR involvement in U.S. listed companies. I create two measures of social status: I differentiate between ascribed (inherited) and achieved (acquired) social status, and assess the influence of both measures of social status on the incidence of FFR. To allow for an even deeper level of analysis of the effect of social status on the likelihood of fraud involvement, I construct an empirically based typology of social status which includes the different possible combinations of inherited and acquired status that a director may have. I find that directors with higher inherited social status, those who attained undergraduate degrees from elite educational institutions, were less likely than lower-status directors to engage in FFR. I show evidence of significantly reduced incidence of FFR among directors with high acquired status attained through postgraduate degrees from elite educational institutions or through occupational status, income status or the receipt of prestigious awards. I also find that the impact of a director’s social status on the incidence of FFR is weakest among directors that possess both high inherited and high acquired status simultaneously (supreme elite) and strongest among directors who possess both low inherited and acquired social status (social laggards). Second, I investigate whether there is an empirical link between gender and the incidence of FFR involvement. The examined data show strong evidence consistent with the view that the importance of women on boards in mitigating securities fraud lies in the mechanism of diversity itself. I find less direct support for the alternative proposition that women are more ethically sensitive and less likely to risk committing FFR. This research contributes to the academic literature surrounding FFR within the corporate elite in the following ways. First, it extends the prior corporate governance literature on the impact of social status on the incidence of FFR, as reported by the SEC (Bowen et al., 2005; Files et al., 2009; Gordon et al., 2008; Myers et al., 2008). It also contributes to the organizational sociology and criminology literature on the perceived high social status of white-collar offenders who are not ordinarily associated with crime (Poortinga et al., 2006; Soothill et al., 2012; Weisburd et al., 2001). Second, it contributes to the extant body of knowledge with the suggested social status typology for corporate elites. The heart of the typology is the observation that a director may occupy only one of four possible combinations of high or low inherited and acquired social status. Because organizations have internal status hierarchies, all four status combinations could be represented. Given a situation of status strain, that strain may be differentially linked to the four status sub-groups. This typology has the potential to pave the way for a new avenue of management research examining the benefits and hazards of director social status on corporate outcomes and contribute to what McDonald & Westphal (2011) term a more expansive social and psychological perspective on “corporate leadership”. Third, it contributes to improved understanding of gender differences in ethical sensitivity, particularly at the top management level (chairperson, CEO, and board directors). We add to the gender and management literature by generating evidence about gender diversity and fraud. This study extends the COSO (2010) framework and use of a wide range of domains of social status identified in the organizational sociology literature. It differs significantly from prior studies which focuses on 1) a small sub-set of individuals who are of high social status (the top five percent), 2) one single domain or source of status, prestige or respectability, and 3) individuals in specific occupational positions i.e. chief financial officers.
Author: Bolger, Paula
Qualification name:Doctor of Philosophy (Ph.D.)
Type of material:Thesis
Availability:Full text available
Keywords:fraudulent financial reporting (FFR)