To identify the most effective mechanisms for detecting corporate fraud, we study all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but rather takes a village, including several nontraditional players (employees, media, and industry regulators). Differences in access to information, as well as monetary and reputational incentives, help to explain this pattern. In-depth analyses suggest that reputational incentives in general are weak, except for journalists in large cases. By contrast, monetary incentives help explain employee whistleblowing. Copyright (c) 2010 the American Finance Association.

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We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999 to 2002. We find that an investment fund's lobbying increases coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance violation is reversed. This effect is present even when we instrument coverage with an exogenous determinant, the fund's portfolio composition at the beginning of the period. The fund's strategy seems to work in part by impacting Russian companies' reputation abroad and in part by forcing regulators into action. Copyright (c) 2008 by The American Finance Association.

We estimate private benefits of control in 39 countries using 393 controlling blocks sales. On average the value of control is 14 percent, but in some countries can be as low as -4 percent, in others as high a +65 percent. As predicted by theory, higher private benefits of control are associated with less developed capital markets, more concentrated ownership, and more privately negotiated privatizations. We also analyze what institutions are most important in curbing private benefits. We find evidence for both legal and extra-legal mechanisms. In a multivariate analysis, however, media pressure and tax enforcement seem to be the dominating factors.

We thank Mehmet Beceren for assistance in preparing the data and Rakhesh Khurana, Jay Lorsch, Forest Reinhardt, Richard Vietor, Andy Zelleke, and seminar participants at the Harvard Business School for helpful comments on an earlier draft. Alexander Dyck gratefully acknowledges financial support from the Division of Research of Harvard Business School and Luigi Zingales from the George Stigler Center at the University of Chicago. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.