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Fortune 500 firms are most likely to be involved in financial securities fraud

New research spearheaded by researchers at Washington State University uncovered that Fortune 500 firms are more likely to be involved in financial securities fraud in comparison to small businesses.

The study was released in Justice Quarterly.

In association with Pennsylvania State University and Miami University, WSU researchers went back to the global financial crisis which involved countless fraud scandals of renowned firms. It aimed to identify corporate financial fraud during that time span.

“We compiled data on 250+ US public companies involved in corporate securities frauds identified in 1,000+ Securities and Exchange Commission filings over 2005–2013; we randomly selected a comparable control group of 500+ US public companies from Compustat,” researchers wrote in their findings.

“Based on logistic multivariate regression analyses, marginal profitability, a strong growth imperative, and firm prominence were significant fraud risk factors.”

Renowned firms were among the most susceptible to strong growth-opportunities, which made them a high-risk for white-collar crime, researchers determined.

“Prominent Fortune 500 firms were more susceptible to marginal profitability and/or strong growth-opportunities as risk factors,” the co-authors of the study showed.

“Findings were robust to various empirical measures and additional controls for undetected fraud. Anomic growth pressures and profit constraints, especially among America’s most prestigious firms, were linked to corporate securities fraud.”

The malpractice of financial fraud is not just confined to employees or executives within Fortune 500 firms. Elected officials within nations, like the United States, have allegedly engaged in financial securities fraud during the start of the COVID-19 pandemic.

One scandal, occurring in 2020, involved a senior US senator from North Carolina, who escaped charges at the federal level following a brief probe. Within the same scandal, another congressional official allegedly sought the practice of insider trading for the investment of an antimalarial drug the FDA warned on its usage for safety reasons.

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