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Video: What Leads Firms to Engage in Illegal Actions?

Tim Pollock discusses factors that affect the likelihood of firms engaging in illegal behavior, such as a firm’s internal aspirations, external expectations, and prominence. Pollock’s suggests ways investors and regulators can use this information to monitor firms and his results explain why even “good” firms do bad things.

Oct 16, 2009

Tim Pollock discusses why firms engage in illegal behavior and what factors either increase or decrease the likelihood of corporate illegality. He also addresses what implications his results have for investors and regulators.

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"At a Glance"

Tim Pollock studies many firms in the S&P 500 to determine various factors that lead them to engage in illegal behavior. Results show:

  • The higher a firm’s performance relative to internal aspirations and the higher a firm’s performance relative to external expectations, the more likely a firm is to engage in illegal actions.
  • In terms of performance relative to internal aspirations, prominent firms are more likely to engage in illegal actions than less prominent firms.
  • When gauging performance relative to external expectations, prominent firms are more likely to engage in illegal actions, but less prominent firms were not affected by this variable.
  • The longer a firm has performed at a really high level, the more regulators should keep an eye on the firm.