WANG, TRACY YUE; WINTON, ANDREW; YU, XIAOYUN - In: Journal of Finance 65 (2010) 6, pp. 2255-2292
We examine how a firm's incentive to commit fraud when going public varies with investor beliefs about industry business conditions. Fraud propensity increases with the level of investor beliefs about industry prospects but decreases when beliefs are extremely high. We find that two mechanisms...