会计欺诈外文翻译文献

会计欺诈外及翻译文献（文档含中英文对照即英文原文和中文翻译）译文：会计欺诈和机构投资者查得-R•拉森介绍美国资本市场依赖财务报告系统来帮助有效分配资本。最近的财务报告过程中故障在许多高调公司新的人员的监管机构，会计欺诈和市场参与者的兴趣。两个重要的经验规律的文献记录极端操纵收益的决定因素和后果。首先，股票市场反应的启示会计处理显著负面。估计下降公告后的市场价值会计操作范围从20-40%（Palmrose.理查德森和2003李，和马丁2007）。第二，会计操作是可预测的。文献会计操作的文档可以预测的措施准确的质量、会计性能、非金融变量声明和股市变量（如,Beneish1999;Dechow,通用电气,拉尔森和斯隆2007）。虽然会计操作导致重大投资损失和与公司相关的特点和性能，几乎没有证据表明存在成熟的投资者是否能够避免损失与会计欺诈。机构投资者已成为市场的重要力量在过去的几十年。上世纪八十年代初到九十年代末，机构投资者所有权翻倍，股市50%以上（龚帕斯和Metric时,2001）。机构投资者在美国市场存在的上升有意义的促使文献调查他们是否执行是有利可图的交易。文献的结果是喜忧参半。几项研究文档积极变化之间的相互关系，这些机构投资者的资产和未来的收益和回报，这表明机构通知交易员（如，柯和2005;阿里列弗，确认我也承认泰德•克里斯坦森的指导，没有它我就不会了博士学位的挑战。最后，我感谢我的家人的支持。没有这篇论文的完成并不意味着几乎一样多。介绍美国资本市场依赖财务报告系统来帮助有效分配资本。最近的财务报告过程中故障在许多高调公司新的人员监管机构，会计欺诈和市场参与者的兴趣。两个重要的经验规律的文献记录极端操纵收益的决定因素和后果。首先，股票市场反应的启示，会计处理显著负面。估计下降公告后的市场价值会计操作范围从20-40%（Palmrose、理查德森和朔尔茨2003;Karpo_,李，和马丁2007）。第二，会计操作是可预测的。文献会计操作的文档可以预测的措施合格的质量、会计性能、非金融变量声明和股市变量（如,Beneish1999;Dechow,通用电气,拉尔森和斯隆2007）。虽然会计操作导致重大投资损失和与公司相关的特点和性能，几乎没有证据表明存在成熟的投资者是否能够避免损失与会计欺诈。机构投资者已成为市场的重要力量在过去的几十年。从八十年代初到九十年代末，机构投资者所有权翻倍，股市50%以上（。机构投资者在美国市场存在的上升促使文献调查他们是否执行有利可图的交易。文献的结果是喜忧参半。几项研究文档积极变化之间的相互关系，这些机构投资者的资产和未来的收益和回报，这表明机构通知交易员（如。、柯和Ramalingegowda2005;柯和Petron2004;阿里Dutch列弗,Trembles2004）。另一方面,一些文献表明，知情交易可能更有限,发现性能优越的共同基金很少持续（Carat1997;布朗一个曼1995年）和交易考虑通知可能只是动量交易的结果（Bushee和古德曼,2007）。会计欺诈和大市场的可预测性与会计欺诈相关的损失表明，它是一个理想的设定检查成熟的机构投资者。如果机构投资者拥有优越的信息和复杂的会计信息的使用者对会计欺诈，他们应该在欺诈上市公司公开披露前欺诈。我的主要研究问题是机构投资者预期会计欺诈的启示和剥离的股票欺诈公司公开披露之前骗子。作为一个次要的研究问题，我检查是否机构作为有效的公司监控预防欺诈。我使用的会计、审计和执行版本（AAER）涉及欺诈和会计操作作为一个代理第一新闻文章Factiva提及会计违规的公众披露欺诈。我检查机构交易模式在322年企业，美国证券交易委员会（SEC）中标识执行行动从1982年到2005年有操纵会计收益。我的分析是在两个阶段进行。第一阶段是本文分析聚合机构公司级和欺诈检查他们的交易行为。第二阶段是一个阶段分析，利用机构投资者之间的异构性，欺诈行为检查他们的交易行为。公司的分析，我遵循Bushee（2001）组织机构分为三类根据自己的投资风格:瞬态和专用。多元化的投资组合和较低的投资组合营业额机构的特点。多样化的投资组合投资组合交易描述瞬态高机构，和高度集中的投资组合和较低的投资组合营业额专门机构的特点。符合文学之前,我希望发现瞬态机构最有可能发起有利交易欺诈启示的预期和机构不大可能发起有利益可得交易欺诈的预期启示我没有强烈的专门机构研究预测通常找到贸易基于即将到来的未来事件。然而，欺诈是一个独特的设置可能导致专门机构剥离他们的位置。如果专门机构投资公司基于他们的信心的和意愿完整性管理、检测欺诈行为会引起专门机构剥离他们的股份。此外，由于专门机构的特点是高度的投资组合,他们可能会有更大比例的投资组合风险欺诈是否显示。因此，他们可能会有最强的激励预测欺诈和诈骗剥离他们的股票。文献表明，机构投资者作为公司监控（如果是这样的话,那么有可能是诈骗公司低水平的机构投资欺诈行为，因为他们之前缺乏效率监控。因此，我的第一组测试检查机构所有权水平是否欺诈公司立即释放之前第一次欺诈收益报告不同于人口控制的公司。在不变的分析中，我发现欺诈公司实际上有更高水平的总机构所有权，所有权和瞬态比公司所有权制度。专门机构所有权没有显著区别样本公司。接下来，我将进行回归分析，控制公司的特点。我立即发现欺诈的开始之前，机构所有权欺诈公司的总体水平高于制度所有权控制公司的一个示例。然而，我发现更高层次的机构主要是所有权的结果表明斜面更高层次的瞬态机构所有权，专门机构所有权控制后几乎是相同的形式特征。大学和回归结果表明，机构所有权水平不作为一个伶俐的监控装置在欺诈的预防。我的下一套测试提供相关的证据，我的主要研究问题。我第一次检查机构所有权水平变化在欺诈公司在此期间公司提交欺诈。季度发行前的第一次欺诈收益报告，直到季度会计欺诈的公开披露之前，我发现机构所有权欺诈公司增加了近14%，代表一家欺诈公司已发行股份的3.9%。2因为欺诈公司经验股价下跌约35%一旦发现欺诈，欺诈的机构增加3.9%所有权不是微不足道的。事实上，计算表明，总机构损失322年我的样品是诈骗公司的1380亿美元。增加3.9%机构所有权欺诈时期代表约200亿美元的损失。之前的研究已经检查机构是否能预测即将发生的事件在短窗口（Briber,詹金斯和王,2006）。因此，在我的下一组测试，我观察机构所有权的变化后的季度马上前,公开揭露欺诈。我在季度立即欺诈曝光之前，所有权制度降低了大约一个半欺诈公司已发行股份的百分比。我发现能有效的降低瞬态机构持有,而专门的机构持有的变化无关紧要的不会。我也在季后立即找到有效减少欺诈启示。这些结果是强劲的几个控制变量包括现在和过去的股票回报，意想不到的收益,以及分享营业额的变化。虽然我找到证据表明瞬态机构能够预测欺诈前一个时期它的启示这些证据必须解释的证据我之前测试。一个半百分比下降机构所有权欺诈曝光之前虽然显著，稍微减轻相当大的机构投资者的损失。机构更异于三类我受聘于企业层面分析。因此，我进行第二次分析进一步利用机构投资者之间的异质性。我创建代理机构的信息环境和机构的激励机制，以避免负面的市场后果与会计欺诈的启示。条件拥有欺诈公司股票欺诈开始之前，我测试是否与机构的所有权的变化相关联的代理是欺诈公司前会计欺诈的启示。结果提供一些证据表明与最强的激励制度，以避免会计欺诈和最高的质量信息环境剥离前股票欺诈公司会计欺诈的启示。尽管数据符合资产剥离率的增加在这些机构中，我无法确定这些关系的结果通知交易或自然的所有权水平均值回归。这项研究应该感兴趣的机构投资者和研究者。研究结果表明,机构投资者失去钱的重要性通过投资公司提交会计欺诈。进一步的证据有助于我的研究文献记录复杂的机构投资者。至少在这个特殊的背景下，大多数机构似乎没有复杂的会计信息用户;然而，我确实提供了有限的证据前立即通知本季度交易欺诈机构之间的一个子集的启示。这些投资的标准可能会导致这些机构倾斜特征，更有可能来证明他们的投资组合的审慎投资。例如发现高的银行向企业倾斜投资组合标准普尔股票评级。Bushee和古德曼（2007）,这是一个指示符变量等于一个如果一个机构的市场价值的股票投资组合的五等分顶层，否则所有机构在一个特定的季度和0。因为大多数机构拥有更多的资源，我希望ISIZE是一个机构的代理获取和处理信息的能力。因此，我认为,大型机构将更有可能出售公司的股票有欺诈行为。我发现了两个额外的措施,代理机构的私人信息和激励措施,以避免会计欺诈。选择，第一个是一个变量，措施的相对大小的股权机构风险在一个特定的公司。打赌测量作为应声股本旗下机构j公司我在一季度t扩展机构j的总市场价值的投资组合在季度t。我希望押注是负相关的制度变迁在欺诈公司的所有权。与更高水平的机构选择相对比水平较低的企业风险价值选择，因此，这些机构有更大的激励来收集私人信息，避免投资公司有欺诈行为。我最后的机构公司水平变量，这是一个指示符变量等于一个如果一个机构持有的流通股总量的百分比在公司五等分顶层的制度，公司所有权和零。我希望块与私人信息优势，因为这些机构更有可能获得私人信息和更愿意承担私人信息采集和处理的成本。因此，我希望阻止将负相关的机构持有的诈骗公司的变化。Bushee和古德曼(2007)是第一个采用这两种措施指出是一个很好的衡量去激励收集公司信息。原文：AccountingFraudandInstitutionalInvestorsByChadR.LarsonIalsoacknowledgethementorshipofTedChristensenwithoutwhichIwouldhavenevertakenonthechallengeofadoctorate.Lastly,Iamgratefulforthesupportofmyfamily.Withoutthemthecompletionofthisdissertationwouldnotmeannearlyasmuch.IntroductionU.S.capitalmarketsrelyonfinancialreportingsystemstohelpeffectivelyallocatecapital.Therecentbreakdownsinthefinancialreportingprocessatmanyhighprofilecompanieshaverenewedresearchers',andmarketparticipants'interestinaccountingfraud.Twoimportantempiricalregularitiesemergefromthebodyofliteraturedocumentingthedeterminantsandconsequencesofextremeearningsmanipulations.First,stockmarketreactionstotherevelationofaccountingmanipulationsaresignificantlynegative.Estimateddeclinesinmarketvaluefollowingthepublicannouncementofaccountingmanipulationsrangefrom20to40percent(Palmore,Richardson,andScholz2003;Karpo_,Lee,andMartin2007).Second,accountingmanipulationsarepredictable.Abodyofliteraturedocumentsthataccountingmanipulationscanbepredictedwithmeasuresofaccuratequality,accountingperformance,non-financialstatementvariables,andstockmarketvariables(e.g.,Beneish1999;Dechow,Ge,Larson,andSloan2007).Althoughaccountingmanipulationsresultinsignificantinvestorlossesandareassociatedwithfirmcharacteristicsandperformance,littleevidenceexistsonwhethersophisticatedinvestorsareabletoavoidlossesassociatedwithaccountingfraud..Institutionalinvestorshavebecomeasignificantmarketforceoverthelastseveraldecades.Fromtheearly1980stothelate1990s,institutionalinvestorsdoubledtheirownershipintheequitymarketstoover50percent(GompersandMetrick,2001).TherisingpresenceofinstitutionalinvestorsintheU.S.marketshasspurredasigni_cantbodyofliteratureinvestigatingwhethertheyexecutepro_tabletrades.Theresultsoftheliteraturearemixed.Severalstudiesdocumentpositiveassociationsbetweenchangesininstitutionalinvestors'holdingsandfutureearningsandreturns,suggestingthatinstitutionsareinformedtraders(e.g.,KeandRamalingegowda2005;KeandPetroni2004;Ali,Durtschi,Lev,andThrombley2004).Ontheotherhand,someliteraturesuggeststhatinformedtradingmightbemorelimited,findingthatsuperiormutualfundperformanceisrarelypersistent(Carhart1997;BrownanGoetzmann1995)andtradingpatternspreviouslyconsideredinformedmightsimplybetheresultofmomentumtrading(BusheeandGoodman,2007).Thepredictabilityofaccountingfraudandthelargemarketlossesassociatedwithaccountingfraudsuggestthatitisanidealsettingtoexaminethesophisticationofinstitutionalinvestors.Ifinstitutionalinvestorspossesssuperiorinformationandaresophisticatedusersofaccountinginformationwithrespecttoaccountingfraud,theyshouldsellsharesinfraudfirmspriortopublicrevelationsoffraud.Myprimaryresearchquestioniswhetherinstitutionalinvestorsanticipateaccountingfraudrevelationsanddivestsharesinfraudfirmspriortothepublicrevelationoffrauds.Asasecondaryresearchquestion,Iexaminewhetherinstitutionsactaseffectivefirmmonitorsinthepreventionoffraud.IuseAccounting,Auditing,andEnforcementReleases(AAER)involvingaccountingmanipulationsasaproxyforfraudandthefirstpressarticleinFactivamentioninganaccountingirregularityasthepublicrevelationoffraud.1Iexamineinstitutionaltradingpatternsin322firmsthattheSecuritiesandExchangeCommission(SEC)identifiedinenforcementactionsfrom1982through2005ashavingmanipulatedtheiraccountingearnings.Myanalysisisconductedintwostages.Thefirststageisafirm-levelanalysisthataggregatesinstitutionsatthefirm-levelandexaminestheirtradingbehaviorinfraud_rms.Thesecondstageisaninstitution-levelanalysisthatexploitstheheterogeneityamonginstitutionalinvestorsandexaminestheirtradingbehaviorinfraud_rms.Formyfirm-levelanalysis,IfollowBushee(2001)bygroupinginstitutionsintothreecategoriesbasedontheirinvestmentstyles:quasi-indexer,transient,anddedicated.Diversifiedportfoliosandlowportfolioturnovercharacterizequasi-indexerinstitutions.Diversifiedportfoliosandhighportfolioturnovercharacterizetransientinstitutions,andhighlyconcentratedportfoliosandlowportfolioturnovercharacterizededicatedinstitutions.Consistentwithpriorliterature,Iexpecttofindthattransientinstitutionsarethemostlikelytoinitiateprofitabletradesinanticipationofafraudrevelationandquasi-indexerinstitutionsareunlikelytoinitiateprofitabletradesinanticipationofafraudrevelation(e.g.,KeandRamalingegowda2005;Hribar,Jenkins,andWang2006).Imakenostrongpredictionsfordedicatedinstitutionsasresearchtypicallyfindsthattheydonottradebasedonimpendingfutureevents.However,fraudisauniquesettingthatmayleaddedicatedinstitutionstodivesttheirpositions.Ifdedicatedinstitutionsinvestinfirmsbasedontheirconfidenceinthevisionandintegrityofmanagement,detectingafraudmightleaddedicatedinstitutionstodivesttheirshares.Inaddition,sincededicatedinstitutionsarecharacterizedbyhighly-concentratedportfolios,theyarelikelytohavealargerpercentageoftheirportfoliosatriskiffraudisrevealed.Therefore,theyarelikelytohavethestrongestincentivestoanticipatefraudanddivesttheirsharesinfraud_rms.Abodyofliteraturesuggeststhatinstitutionalinvestorsactasfirmmonitors(e.g.Chung,Firth,andKim2002;Chen,Harford,andLi2007).Ifthisisthecase,thenitispossiblethatfraudfirmshavelowlevelsofinstitutionalinvestmentpriortocommittingfraudbecausetheylackefficiencymonitoring.Therefore,myfirstsetoftestsexamineswhetherinstitutionalownershiplevelsinfraudfirmsimmediatelypriortothereleaseofafirstfraudulentearningsreportdifferfromapopulationofcontrolfirms.Inunvariedanalysis,Ifindthatfraudfirmsactuallyhavehigherlevelsoftotalinstitutionalownership,quasi-indexerownership,andtransientinstitutionalownershipthannon-fraudfirms.Dedicatedinstitutionalownershipisnotsignificantlydifferentfromthenon-fraudsampleoffirms.Next,Iconductregressionanalysisthatcontrolsforfirmcharacteristics.Ifindthatimmediatelypriortothebeginningofafraud,fraudfirms'totallevelofinstitutionalownershipishigherthaninstitutionalownershipforasampleofcontrolfirms.However,Ifindthatthehigherlevelofinstitutionalownershipisprimarilytheresultofasigncanthigherleveloftransientinstitutionalownership,whilequasi-indexeranddedicatedinstitutionalownershipisnearlyidenticalaftercontrollingformcharacteristics.TheuniversityandregressionresultssuggestthatthelevelofinstitutionalownershipdoesnotactasasapientmonitoringdeviceinthePreventionoffraud.Mynextsetsoftestsprovideevidencerelatingtomyprimaryresearchquestion.Ifirstexaminechangesininstitutionalownershiplevelsinfraudfirmsovertheperiodfirmscommitfraud.Fromthequarterpriortotheissuanceofafirstfraudulentearningsreportuntilthequarterpriortothepublicrevelationofanaccountingfraud,Ifindthatinstitutionalownershipinfraudfirmsincreasesbyalmost14percent,representing3.9percentofafraudfirm'soutstandingstock.2Becausefraudfirmsexperiencestockpricedeclinesofapproximately35percentoncethefraudisrevealed,the3.9percentincreaseininstitutionalownershipoverthefraudperiodisnottrivial.Infact,calculationssuggestthattotalinstitutionallossesforthe322fraudfirmsinmysampleareinorderof$138billion.The3.9percentincreaseininstitutionalownershipoverthefraudperiodrepresentsapproximately$20billionofthoselosses.Priorresearchhasexaminedwhetherinstitutionscanpredictimpendingeventsovershortwindows(Hribar,Jenkins,andWang,2006).Accordingly,inmynextsetoftests,Iobservechangesininstitutionalownershipinthequartersimmediatelypriortoandfollowingthepublicrevelationoffraud.Iamthatinthequarterimmediatelypriortoafraudrevelation,institutionalownershipdecreasesbyapproximatelyoneandahalfpercentofafraudfirm'soutstandingstock.Ifindsignificantdecreasesfortransientinstitutionalholdings,whilechangesinquasi-indexeranddedicatedinstitutionalholdingsareinsignificant.Ialsofindsignificantdecreasesinthequarterimmediatelyfollowingthefraudrevelation.Theseresultsarerobusttoseveralcontrolvariablesincludingcurrentandpaststockreturns,unexpectedearnings,andchangesinshareturnover.AlthoughIfindcomeevidencethattransientinstitutionsareabletoanticipatefraudoneperiodpriortoitsrevelation,thisevidencemustbeinterpretedinlightofevidencefrommyprevioustests.Theoneandahalfpercentdecreaseininstitutionalownershippriortofraudrevelations,thoughstatisticallysignificant,onlyslightlymitigatessubstantiallossesforinstitutionalinvestors.InstitutionsaremoreheterogeneousthanthethreecategoriesIemployinmyfirm-levelanalysis.Therefore,Iconductasecondanalysisattheinstitution-levelthatfurtherexploitstheheterogeneityamonginstitutionalinvestors.Icreateproxiesforinstitutions'informationenvironmentsandinstitutions'incentivestoavoidthenegativemarketconsequencesassociatedwiththerevelationofaccountingfraud.Conditionalonowningfraudfirmsharespriortoafraudbeginning,Itestwhethertheproxiesareassociatedwithinstitutions'ownershipchangesinfraudfirmspriortotherevelationofanaccountingfraud.Theresultsprovidesomeevidencethatinstitutionswiththestrongestincentivestoavoidaccountingfraudandwiththehighestqualityinformationenvironmentsdivestsharesinfraudfirmspriortotherevelationofaccountingfraud.Althoughthedataareconsistentwithanincreasedrateofdivestituresamongtheseinstitutions,Iamunabletoestablishwhethertheserelationsarearesultofinformedtradingornaturalmeanreversioninownershiplevels.Thisstudyshouldbeofinteresttobothinstitutionalinvestorsandresearchers.Theresultssuggestthatinstitutionalinvestorslosesignificantamountsofmoneybyinvestinginfirmsthatcommitaccountingfraud.Mystudycontributesfurtherevidencetothebodyofliteraturedocumentingthesophisticationlevelofinstitutionalinvestors.Atleastforthisparticularcontext,mostinstitutionsdonotappeartobesophisticatedusersofaccountinginformation;however,Idoprovidelimitedevidenceofinformedtradinginthequarterimmediatelypriortofraudrevelationsamongasubsetofinstitutions.Theremainderofmydissertationproceedsasfollows.Chapter2examinespriorliteratureandoutlinesmyempiricalpredictions.Chapter3outlinesmyresearchdesign.Chapter4describesmysampleselectionprocessandprovidesdescriptivestatistics.Chapter5detailsmytestsandpresentsresultsandchapter6concludes.PriorLiteratureandEmpiricalPredictionsMydissertationbuildsontwostreamsofpriorliterature.Thefirststreamofliteratureexaminesthedeterminantsandconsequencesofaccountingmanipulations.Thesecondstreamofliteratureexaminesthetradingbehaviorofinstitutionalinvestors.AccountingManipulationsPriorresearchhasidentifiedcharacteristicsoffirmsthatmanipulatetheirfinancialstatements.Dechow,Ge,Larson,andSloan(2007)investigateacomprehensivesampleofall895firmssubjecttoAccounting,Auditing,andEnforcementReleases(AAER)from1982throughJuly2005.Theyexaminetheuseofseveralfinancialstatementvariables,o_-balancesheetandnon-financialvariables,andmarket-relatedvariablestopredictaccountingmanipulations.TheyhadthatfirmsaccusedbytheSECofmanipulatingtheir_financialperformancetendtohavehadstrongperformancepriortomanipulations.Theyalsoandthatmanipulationsappeartobemotivatedbymanagers'desiretoobfuscatedeterioratingfinancialperformance.Duringmanipulationyears,theyfindthatcashprofitmarginsandreturnonassetsaredecliningwhileaccrualsareincreasing.Theyalsofindthatfirmsmanipulatingfinancialreportingaremorelikelytoissuedebtandequity.Rankingfirmsbasedonthepredictedlikelihoodofaccountingmanipulationsfromalogisticmodel,theyclassifyalmost50percentofmanipulationfirmsinthetop20percentoftheirmanipulationindexand65percentofmanipulationfirmsinthetop40percentoftheirindex.Beneish(1999)createsafraudpredictionmodelbasedonasampleof74firmsthatmanipulatedearningsandasampleof2,332matchedfirms.Estimatingprobitymodelsofaccountingmanipulationsasafunctionofeightaccountingbasedvariables(indexedday'ssalesinreceivables,grossmargin,assetquality,salesgrowth,depreciation,sales,generalandadministrativeexpenses,leverage,andaccrualstototalassets)heisabletocorrectlyclassifyapproximately50to75percentoffraudfirms,whileincorrectlyclassifyingonly10to20percentofmatchedfirms.Severalotherstudiesdocumentrelationsbetweenearningsmanipulationfirmsandfirmcharacteristics.TwoothernotablestudiesincludeDechow,Sloan,andSweeney(1996)andBrazel,Jones,andZimbelman(2006).Dechowetal,(1996)examineasampleof92firmswithanAAERfrom1982to1992.TheydocumentthatAAERsareassociatedwithexternalfinancingneedsandpoorcorporategovernance.TheyalsoshowthatAAERfirmsexperiencesignifiescantincreasesintheircostofcapitalaftertherevelationsofaccountingmanipulations.Brazeletffal,(2006)alsoandthatseveralnon-financialmeasurescanbeusefulinpredictingaccountingmanipulations.AlthoughthenumberofTypeIerrorsinfraudpredictionmodelsisrelativelyhigh,therelativecostofTypeItoTypeIIerrorsforinstitutionalinvestorsislikelyextremelylow.Severalstudieshaveestimatedinvestmentlosseswhenaccountingmanipulationsarerevealed.ThelatestlargesampleevidencesuggeststhatthecostofTypeIIerrorsaverageapproximately40percentofaninstitution'sinvestmentinafraudfirm(Karpo,Lee,andMartin,2007).Ontheotherhand,thecostofaTypeIerrorisextremelylowinamarketwithmanysubstituteassetsasinvestorscansimplychoosenottoholdfirmswithahighprobabilityoffraud.Investorsmayalsobeprivytoprivateinformationregardingfirmperformanceandaccountingmanipulations.Totheextentthatinvestorspossessprivateinformationandchoosetouseotherqualitativeinformation,theymaybeabletosignificantlyreducethenumberofTypeIandIIerrorsincurredwhenattemptingtoidentifyaccountingfrauds.ThehighnumberofTypeIerrorsassociatedwithusingearningsmanipulationpredictionmodelsmightalsosuggestthatinvestorswouldbewillingtolivewiththenegativereturnsassociatedwithfraud_firmsifthenegativereturnsarebalancedoutwithsuficientlypositivereturnsfromnon-fraud_firmswithstrongsignalsoffraud.Inaconcurrentworkingpaper,BeneishandNichols(2007),showthatthisisnotthecase.Theirresultsrevealthat_firmswithahighprobabilityofmanipulatedearnhavelowerfutureearningsandreturns.Theyalsoshowthatatradingstrategybasedontheprobabilityofearningsmanipulationyieldsanabnormalhedgereturnof13.9percent.Throughadditionalteststheyconcludethatthereturns,whichareconcentratedontheshortside,arenotaresultofasymmetricarbitragecosts,butratheraresultofasymmetricerrorsinmarketexpectations.BeneishandNichols(2007)donotprovidedirectevidenceon_firmsthatactuallymanipulateearn,rathertheyexamineportfoliosoffirmswithahighprobabilityofmanipulation.Theyfindthatinstitutionalinvestorsincreasetheirholdingsinfirmswithahighprobabilityofmanipulation.Mystudyfocusesontheactualincidenceoffraud.Iamabletoprovidemoredetailedanddirectevidenceonthetradingbehaviorofinstitutionsinactualfraud_firmsbefore,during,andaftertheperiodinwhichfirmscommitfraudandthefraudsbecomepublic.2.2InstitutionalInvestorsFrom1980to1996,institutionalinvestorsdoubledtheirshareofthemarketandnowcontroloverhalfoftheU.S.equitymarket(GompersandMetrick,2001).Theincreasedimportanceandperceivedsophisticationofinstitutionalinvestorshasspawnedalargebodyofliterature.Onebranchoftheliteratureexamineswhetherinstitutionalinvestorsactasmonitorsandinfluencemanagements'decisions.Theevidencesuggeststhatthelevelofinstitutionalownershipandthecompositionofafirm'sinstitutionalownershipbasematterswhendeterminingwhetherinstitutionalownersarelikelytoactaseffectivemonitors.Bushee(1998)findsthatmanagersarelesslikelytocutresearchanddevelopmentexpenseswhenfacinganearningsshortfallifinstitutionalownershipishigh.Buthealsofindsthatlargeproportionsofownershipbyinstitutionsthattradebasedonmomentumandhavehighportfolioturnoverincreasethelikelihoodthatafirmwillcutresearchanddevelopmenttomeetanearningsshortfall.Chung,Firth,andKim(2002)findthatlargeinstitutionalshareholdingsinafirmreducethelikelihoodofearningsmanagementusingaccruals.Chen,Harford,andLi(2007),usingacquisitiondecisionstorevealmonitoring,findthatinstitutionswithlong-terminvestmentsspecializeinmonitoringwhileotherinstitutionsdonotmonitor.Bushee(2001)findsthathighlevelsofshort-terminvestorsareassociatedwithanover-weightingofnear-termexpectedearningsandunder-weightingoflong-termexpectedearnings.Inlightofthiscombinedevidence,myfirstpredictionisthatfraudfirms,priortotheissuanceoftheirfirstfraudulentearningsreport,arelikelytohavelowlevelsofinstitutionalownership.Ialsoexpectthatfraudfirmswillhavehigherlevelsofshort-term,transient,institutionalownershipandlowerlevelsoflong-term,dedicated,institutionalownership.Muchoftheaccountingresearchoninstitutionalinvestors'tradingbehaviorsuggeststhatinstitutionalinvestorsaresophisticatedusersofaccountinginformation.Forexample,previousliteraturehasdocumentedthatthehigherthelevelofinstitutionalownership,thesmallerthemarketreactionsurroundingearningsannouncements(El-Gazzar,1998).Balsam,Bartov,andMarquardt(2002)findthatthevaluationimplicationsoflargediscretionaryaccrualsareincorporatedintostockpricesmorequicklyfor_rmswithlargeinstitutionalinvestorbases.Thepresenceofinstitutionalinvestorsisalsopositivelyassociatedwiththeextentthatpricesleadearnings(Jiambalvo,RajGopal,andVenkatachalam,2002).Studieshavealsoshownthatinstitutionalinvestorsexploitaccountingbasedstockpriceanomaliessuchasthepost-earningsannouncementdrift(KeandRamalingegowda,2005)andtheaccrualsanomaly(Collins,Gong,andHribar,2003).LevandNissim(2006)alsoshowthattheaccrualsanomalyisexploitedbysomeinstitutionalinvestors,butthemagnitudeofthisaccruals-relatedtradingisrathersmall.Theyshowthatthecontinuedpersistenceoftheaccrualsanomalyisnotexplainedbyalackofunderstandingamonginstitutions,butratheraninstitutionaldistasteforextreme-accrualsfirmsthataretypicallysmall,unprofitable,andrisky.KeandRamalingegowda(2005)findthatinstitutionsalsopossessinformationthatallowsthemtoavoidnegativestockpriceshocksassociatedwithabreakinastringofconsecutiveearningsincreases.Althoughmuchoftheliteratureoninstitutionalinvestorssuggeststhattheyaresophisticatedusersoffinancialinformation,thisliteraturestandsincontrasttoevidencethatquestionswhetherinstitutionsprofitfrominformationaladvantages.Forexample,muchoftheliteratureonmutualfundperformancesuggeststhatsuperiorperformanceisnotpersistent(e.g.,BrownandGoetzmann1995).Additionally,O'BrienandBhushan(1990)_findthatinstitutionsareattractedtofirmswithmoreanalystfollowing.Similarly,BusheeandNoe(2000)_findthatinstitutionsareattractedtofirmswithhigh-qualitydisclosureregimes.Therefore,ifpublicandprivateinformationaresubstitutes,institutionsshouldhavefeweropportunitiestobenefitfrominformationaladvantages.Ifinstitutionalinvestorspossesssuperiorprivateinformationorinformationprocessingabilities,Iexpecttofindsupportformysecondpredictionthatinstitutionalinvestorsdivestsharesinfirmsthatarecommittingaccountingfraud.Alackofevidencethatinstitutionsdivestsharesinfraudfirmspriortopublicrevelationsoffraudwouldsuggestthateitherinvestorsareunabletouseprivateinformationtoanticipatepublicannouncementsoffraudorthecostofanticipatingthepublicannouncementsoffraudaretoogreatrelativetothebenefits.Institutionalinvestorsexhibitheterogeneityintheirinvestmentstyles.Priorliteraturehasshownthatthelikelihoodofinformedtradingvarieswithinstitutionalinvestors'characteristics(e.g.,HribarandJenkins2004;KeandRamalingegowda2005).MuchofthepriorliteraturehasreliedonamethodologyproposedbyBushee(1998).Inthismethodology,institutionsarefirstclassifiedintooneofthreeinvestmentstrategies(quasi-indexer,transient,anddedicatedinstitutionalinvestors)basedonportfolioturnoverandstakesizes.Theinstitutionsarethenaggregatedatthefirmlevel.Thebodyofevidencethatusesthismethodologytypicallyfindsthatprofitabletradinginanticipationoffutureeventsisonlyidentityableforthetransientinvestorcategory.Therefore,Iexpectanyevidencethatinstitutionalinvestorspredictaccountingfraudwillbeconcentratedamongtransientinstitutionalinvestors.Becausededicatedinstitutionalownershavethelargestportionoftheirportfoliosatstakewhenafraudisrevealed,Ialsoanticipatethepossibilitythattheymaydivestsharesinanticipationoffraudrevelations.Inarecentpaper,BusheeandGoodman(2007)exploittheheterogeneityamonginstitutionalinvestorsandthepositionstheyholdbyconductingananalysisthatincludesnotonlyinstitution-levelvariablessuchasportfoliosizeandtradingstrategybutalsoinstitutionfirm-levelcharacteristicssuchasthesizeofapositioninaparticularfirmandthesizeofth