The causes and financial consequences of corporate frauds

Another wave of corporate scandals has hit the market in the last decade, reviving attention to the effect of these events on shareholder value, corporate governance and stock market reactions. Given this evidence a growing body of research has investigated the determinants of frauds, the effects of frauds on investors and stakeholders wealth and tried to identify channels and tools to early detect frauds and therefore reduce the loss in social welfare. This chapter provides a comprehensive view on the state of the current research on these issues and provides suggestions for future research.