The effect of white collar crime announcement on stock price performance. Evidence from Malaysian stock market
| DOI | https://doi.org/10.1108/JFC-03-2015-0016 |
| Date | 03 October 2016 |
| Pages | 1126-1139 |
| Published date | 03 October 2016 |
| Author | Liang-Mui Tay,Chin-Hong Puah,Rayenda Khresna Brahmana,Nurul Izza Abdul Malek |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
The effect of white collar crime
announcement on stock
price performance
Evidence from Malaysian stock market
Liang-Mui Tay, Chin-Hong Puah,
Rayenda Khresna Brahmana and Nurul Izza Abdul Malek
Faculty of Economics and Business, Universiti Malaysia Sarawak,
Kota Samarahan, Malaysia
Abstract
Purpose – The purpose of this paper is to investigate the connection between ethics and protability
by examining the association between published reports on white-collar crime and the share-price
performance of the Malaysian-listed companies. This study aims to examine the role of white-collar
crime in Malaysian-listed companies on its stock-price reaction.
Design/methodology/approach – Following prior research, even study methodology is used to
exploit the stock-price reaction on the white-collar crime announcement. The daily bases of average
abnormal returns (AARs) and cumulative average abnormal returns (CAARs) with an event window of
90 days prior to and after the announcements are determined. This study uses public announcement
data of white-collar crimes from Malaysian Securities Commission from 1996 to 2013.
Findings – The nding indicates that an announcement of a white-collar crime has a negative
abnormal return on the share price. As a result, the market does not react efciently toward the
information released regarding the incidence of a white-collar crime.
Practical implications – This study contributes to the managerial decision theory, where managers
should be able to see a denite connection between unethical behavior and their rm’s stock. The
stockholders and policymakers should nd this information important in pressing for greater corporate
and managerial accountability.
Originality/value – Unlike prior research, this paper investigates the stock-price performance due to
white-collar crime announcement in the Malaysian context by using complete data set of announcement
from 1996 to 2013.
Keywords White collar crime, Event study, Stock price
Paper type Research paper
1. Introduction
The economic impact of a white-collar crime is massive. An estimate of the cost of a
white-collar crime to companies, government and society around the world is around
US$10tn annually worldwide (The Millennium Project, 2008). Further, a survey done by
PricewaterhouseCoopers (PwC) reports that about 30 per cent of more than 3,600
companies they studied had suffered from fraudulent acts, with an average loss of
US$2m. Those dossiers are supported by the empirical ndings in the white-collar crime
The authors acknowledge the nancial support of Universiti Malaysia Sarawak (UNIMAS) and
Malaysia Ministry of Higher Education via RAGS/SS07(1)/1035/2013(02).
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
JFC
23,4
1126
Journalof Financial Crime
Vol.23 No. 4, 2016
pp.1126-1139
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-03-2015-0016
To continue reading
Request your trial