Do liquid assets lure managers? Evidence from corporate misconduct

Authors

Rashid Zaman, Edith Cowan UniversityFollow
Nader Atawnah, Edith Cowan UniversityFollow
Muhammad Nadeem
Stephen Bahadar
Irfan H. Shakri, Edith Cowan UniversityFollow

Document Type

Journal Article

Publication Title

Journal of Business Finance & Accounting

Publisher

Wiley

School

School of Business and Law

RAS ID

43303

Comments

Zaman, R., Atawnah, N., Nadeem, M., Bahdar, S., & Shakri, I. H. (2022). Do liquid assets lure managers? Evidence from corporate misconduct. Journal of Business Finance & Accounting, 49(7-8), 1425-1453.

https://doi.org/10.1111/jbfa.12591

Abstract

We examine the effect of asset redeployability on corporate misconduct and find a significant positive relationship. Utilizing a large sample of public US firms for the period of 2001 to 2015, we find that a one standard deviation (SD) increase in the proportion of redeployable assets leads to a 7.2% increase in corporate fines. We also find that the positive association between asset redeployability and corporate misconduct varies across types of misconduct and industrial heterogeneity. In our channel analysis, we find that managerial risk-taking is a potential mechanism through which asset redeployability is associated with misconduct. Additional tests reveal that corporate misconduct associated with asset redeployability leads to lower firm value. Our results remained robust in a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. Our paper contributes to the ongoing discourse on the costs and benefits of asset redeployability.

DOI

10.1111/jbfa.12591

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 License.