Based on stepwise-logistic models, this study finds that financial leverage, capital turnover, asset composition and firm size are significant factors associated with fraudulent financial reporting Prediction results suggest that these models outperform a nae strategy of classifying all firms as nonfraud firms for all levels of relative costs of type I and type II errors. The models also correctly identify a large percentage of fraud firms and misclassify a relatively small percentage of nonfraud firms when realistic relative error costs are assumed.

This paper empirically examines specifi c characteristics of an audit committee that could be associated with the likelihood of earlier voluntary ethics disclosure. The sample includes fi rms that were investigated by the Securities Exchange Commission for fraudulent fi nancial reporting before the Sarbanes -Oxley Act ' s ethics rule became effective, and their matched no-fraud fi rms. This study fi nds that the level of voluntary ethics disclosure was very low compared to the current mandatory disclosure. Results based on a logit regression analysis suggest that fi rms which made earlier voluntary ethics disclosure were likely to have a larger and more independent audit committee that met more often, and were less likely to engage in fraudulent fi nancial reporting. These results should help policy-makers, investors and boards of directors focus on these audit committee characteristics, which could be crucial not only to ethics disclosure, but also to the ethical conduct of a fi rm. In particular, results regarding size and meeting frequency highlight how to further improve the effectiveness of an audit committee and the quality of an ethics code not only in the United States, but also in other countries. These characteristics may also indicate a fi rm ' s propensity to make any voluntary disclosures, and may help to explain the differential quality of current mandatory ethics codes in the United States. Additionally, these results should be useful to global investors who desire to use corporate governance criteria for screening stock investments in countries where there are no ethics-code requirements.

This study examines the relation between the likelihood of financial statement fraud and certain corporate governance requirements of the Sarbanes‐Oxley Act and the new rules of the NYSE and the NASDAQ stock markets. Results based upon a logit regression analysis on a sample of 111 fraud firms and 111 matched no‐fraud firms indicate that fraud likelihood is lower when audit committee is comprised solely of independent directors and when audit committee members have smaller number of directorships with other companies. Board of director independence, audit committee expertise and nominating committee independence are not significant variables in reducing fraud likelihood. The study also investigates several other corporate governance variables and finds that fraud likelihood is lower when audit committee has longer tenure and chief executive officer is not chairman of the board. These results highlight two new significant aspects of audit committee: the directorships of its members with other firms and the committee members' tenure. The results have direct implications for further improvement of corporate governance.

This study investigates the impact of fraud/lawsuit revelation on U.S. top executive turnover and compensation. It also examines potential explanatory variables affecting the executive turnover and compensation among U.S. fraud/lawsuit firms. Four important findings are documented. First, there was significantly higher executive turnover among U.S. firms with fraud/ lawsuit revelation in the Wall Street Journal than matched firms without such revelation. Second, although on average, U.S. top executives received an increase in cash compensation after fraud/lawsuit revelation, this increase is smaller than that of matched non-fraud/lawsuit firms. Third, fraud/lawsuit firms were more likely to change top executive when chief executive officer (CEO) was not the board chairman and CEO had been on the board for a short time. Fourth, fraud/lawsuit firms were more likely to reduce their executive cash compensation when profitability was low, firms were involved in fraud, the compensation committee size was small, and the board met more often. These findings indicate that although, in general, U.S. fraud/lawsuits firms did not reduce their executive cash compensation, those involved in fraud were more likely to reduce their executive cash compensation than to change their top executives. The finding, that ethical standards is not a significant factor for U.S. executive turnover nor compensation reduction,suggests that ethics appears to play no part in the board's decisions, and that U.S. firms may have ethical standards in writing but they do not implement nor enforce the standards.

The author thanks Kuakul Srichandrabhandhu at the Bank of Thailand for providing a copy of the Bank of Thailand's reports. Funding from the Davis Fellowship of College of Business Administration at Rider University is gratefully acknowledged.