Do Liquid Assets Lure Managers? Evidence From Corporate Misconduct
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Zaman, Rashid
Atawnah, Nader
Nadeem, Muhammad
Bahadar, Stephen
Shakri, Irfan Haider
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Wiley
Abstract
We examine the effect of asset redeployability on corporate misconduct and find a significant positive relationship. Utilizing a large sample of public US firms for the period of 2001 to 2015, we find that a one standard deviation (SD) increase in the proportion of redeployable assets leads to a 7.2% increase in corporate fines. We also find that the positive association between asset redeployability and corporate misconduct varies across types of misconduct and industrial heterogeneity. In our channel analysis, we find that managerial risk-taking is a potential mechanism through which asset redeployability is associated with misconduct. Additional tests reveal that corporate misconduct associated with asset redeployability leads to lower firm value. Our results remained robust in a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. Our paper contributes to the ongoing discourse on the costs and benefits of asset redeployability.
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Social Sciences, Business & Economics, agency conflict, asset redeployability, corporate misconduct, managerial risk-taking, CEO overconfidence, equity incentives, firms, risk, specificity, earnings, behavior, fraud, compensation, acquisitions, 3501 Accounting, Auditing and Accountability, 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 3507 Strategy, Management and Organisational Behaviour, 1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment, Finance
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Journal of Business Finance and Accounting, ISSN: 0306-686X (Print); 1468-5957 (Online), Wiley, 48(7-8), 1425-1453. doi: 10.1111/jbfa.12591
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© 2022 The Authors. Journal of Business Finance & Accounting published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
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Except where otherwise noted, this item's license is described as Creative Commons Attribution CC BY 4.0