The Effect of Deferred Prosecution Agreements on Firm Performance

Date
2019-08-31
Authors
Small, Christopher
De Franco, Gus
Wahid, Aida
Contributor
Advisor
Department
Instructor
Depositor
Speaker
Researcher
Consultant
Interviewer
Annotator
Journal Title
Journal ISSN
Volume Title
Publisher
Volume
Number/Issue
Starting Page
Ending Page
Alternative Title
Abstract
The recent increase in the use of deferred and non-prosecution agreements (DPAs) by government agencies as a mechanism to hold a firm accountable for having engaged in wrongdoing and to reform the firm’s practices has given rise to a vigorous debate regarding the merits and drawbacks of such arrangements, compared with the alternative of prosecuting these firms. We find that firms subject to DPAs experience significantly lower buy and hold returns in the one- to three-year period following the DPA compared with prosecuted firms. These results are consistent with shareholders experiencing a wealth loss when a firm enters into a DPA. We also show that DPA firms experience negative real consequences following the initiation of a DPA, relative to prosecuted firms, as measured by decreases in both sales and the number of employees. These results are inconsistent with the idea that DPAs reduce the collateral damage to stakeholders who are not responsible for the crimes committed by the organization (i.e., innocent parties).
Description
Keywords
Non-prosecution agreements, Deferred prosecution agreements, Litigation, Financial performance
Citation
Extent
Format
Geographic Location
Time Period
Related To
Table of Contents
Rights
Rights Holder
Local Contexts
Email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.