Skip Navigation

Oxford Review of Economic Policy 2005 21(2):198-211; doi:10.1093/oxrep/gri012
This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (5)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Coffee, J. C.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Oxford Review of Economic Policy vol. 21 no. 2 2005 © The Author (2005). Published by Oxford University Press. All rights reserved.

A Theory of Corporate Scandals: Why the USA and Europe Differ

John C. Coffee, Jr
Columbia University Law School

A wave of financial irregularity in the USA in 2001–2 culminated in the Sarbanes–Oxley Act. A worldwide stockmarket bubble burst over this same period, with the actual market decline being proportionately more severe in Europe. Yet, no corresponding wave of financial scandals involving a similar level of companies occurred in Europe. Given the higher level of public and private enforcement in the USA for securities fraud, this contrast seems perplexing. This paper submits that different kinds of scandals characterize different systems of corporate governance. In particular, dispersed ownership systems of governance are prone to the forms of earnings management that erupted in the USA, but concentrated ownership systems are much less vulnerable. Instead, the characteristic scandal in such systems is the appropriation of private benefits of control. This paper suggests that this difference in the likely source of, and motive for, financial misconduct has implications both for the utility of gatekeepers as reputational intermediaries and for design of legal controls to protect public shareholders. The difficulty in achieving auditor independence in a corporation with a controlling shareholder may also imply that minority shareholders in concentrated ownership economies should directly select their own gatekeepers.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 J ECON GEOGRHome page
R. Bauer, R. Braun, and G. L. Clark
The emerging market for European corporate governance: the relationship between governance and capital expenditures, 1997-2005
J. Econ. Geogr., July 1, 2008; 8(4): 441 - 469.
[Abstract] [Full Text] [PDF]

Home page
 Politics SocietyHome page
M. Goyer
Varieties of Institutional Investors and National Models of Capitalism: The Transformation of Corporate Governance in France and Germany
Politics Society, September 1, 2006; 34(3): 399 - 430.
[Abstract] [PDF]


Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.