Experimental feature

Listen to this article

Experimental feature

An early warning system that would give companies an indication of when one of their employees was likely to commit fraud or behave dishonestly in some way would be welcomed by almost every corporation. Now a group of academics have come up with some research that they believe could give employers an indication of whether or not their employees are likely to behave dishonestly.

The academics - Yuan Ding, a professor of accounting at Ceibs, Jeffrey Cohen a professor in the accounting department at the Carroll School of Management at Boston College, Cédric Lesage, senior associate professor accounting and management control at the HEC School of Management and Hervé Stolowy also a professor of accounting and management control at HEC in France, examined almost 40 US corporate fraud cases over a 13-year period and looked at managers’ behaviour. They concluded that managers’ personality traits could offer an indication of the potential for unethical behaviour.

Risk factors include a high standard of living which could encourage unethical decisions, an autocratic personality and a self-inflated opinion. The authors also identify outside pressures including compensation packages which are based on the manager’s ability to reach financial targets and high expectations from outside parties such as investment analysts.

The academics add that a company’s organisational culture can also influence managers’ behaviour. They stress that these are merely risk factors and do not mean that unethical behaviour will automatically follow, however they do suggest that companies should consider these indicators as warning signs.

● Corporate fraud and managers’ behaviour: evidence from the press can be found on the Social Science Research Online Network.

Can bad publicity turn out to be good publicity? the answer, in some cases is a resounding yes from academics at the Stanford Graduate School of Business and the Wharton school at the University of Pennsylvania.

The writers say that in certain cases, for example when the product or company concerned is relatively unknown, even publicity which casts the product in a bad light is still welcome because it creates awareness of the product.

Citing the example of book reviews the authors looked at 240 fiction books that had been reviewed in a newspaper. Unsurprisingly well-known authors who had been given a poor review saw subsequent sales fall, whilst those with glowing reviews saw sales soar. But for those unknown authors whose books were badly reviewed, sales nevertheless remained buoyant.

“This suggests that whereas the negative impression fades over time, increased awareness may remain, which can actually boost the chances that a product will be purchased,” says Prof Alan Sorensen who co-authored the book with Stanford University undergraduate student Scott Rasmussen and Jonah Berger, assistant professor of marketing at the Wharton School at the University of Pennsylvania

Positive effects of negative publicity: when negative reviews increase sales,” Marketing Science, September–October 2010.

Get alerts on Business education when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article