Explore the vast range of titles available.

Whistleblowers are ostensibly a valuable resource to regulators investigating securities violations, but whether there is a link between whistleblower involvement and the outcomes of enforcement actions is unclear. Using a data set of employee whistleblowing allegations obtained from the U.S. government and the universe of enforcement actions for financial misrepresentation, we find that whistleblower involvement is associated with higher monetary penalties for targeted firms and employees and with longer prison sentences for culpable executives. We also find that regulators more quickly begin enforcement proceedings when whistleblowers are involved. Our findings suggest that whistleblowers are a valuable source of information for regulators who investigate and prosecute financial misrepresentation.

An extensive literature examines the causes and effects of financial misconduct based on samples drawn from four popular databases that identify restatements, securities class action lawsuits, and Accounting and Auditing Enforcement Releases (AAERs). We show that the results from empirical tests can depend on which database is accessed. To examine the causes of such discrepancies, we compare the information in each database to a detailed sample of 1,243 case histories in which regulators brought enforcement actions for financial misrepresentation. These comparisons allow us to identify, measure, and estimate the economic importance of four features of each database that affect inferences from empirical tests. We show the extent to which each database is subject to these concerns and offer suggestions for researchers using these databases.

Upon the revelation of corporate misconduct by firms in their portfolios, institutional investors experience a significant discount in the market value of their portfolios, excluding misconduct firms, creating a short-term spillover that averages $92.7 billion losses per year. We examine an expansive set of channels under which this spillover to nontarget firms can occur, and find that it reflects the loss of the embedded value of monitoring by a common institutional owner, enforcement wave activity, and industry peer and business relationships. Institutional investors also experience a significant abnormal outflow of funds in the year following the misconduct event.

We examine the penalties imposed on the 585 firms targeted by SEC enforcement actions for financial misrepresentation from 1978–2002, which we track through November 15, 2005. The penalties imposed on firms through the legal system average only $23.5 million per firm. The penalties imposed by the market, in contrast, are huge. Our point estimate of the reputational penalty—which we define as the expected loss in the present value of future cash flows due to lower sales and higher contracting and financing costs—is over 7.5 times the sum of all penalties imposed through the legal and regulatory system. For each dollar that a firm misleadingly inflates its market value, on average, it loses this dollar when its misconduct is revealed, plus an additional $3.08. Of this additional loss, $0.36 is due to expected legal penalties and $2.71 is due to lost reputation. In firms that survive the enforcement process, lost reputation is even greater at $3.83. In the cross section, the reputation loss is positively related to measures of the firm's reliance on implicit contracts. This evidence belies a widespread belief that financial misrepresentation is disciplined lightly. To the contrary, reputation losses impose substantial penalties for cooking the books.

In this paper, we examine how stock option usage affects total corporate payout. Using fixed-effects panel data estimators on various samples of ExecuComp firms from 1993 to 2005, we find the higher the executive stock options, the lower the total payout, ceteris paribus. We also find some evidence that firms increase payouts through repurchases in order to offset earnings per share dilution that occurs due to usage of executive and non-executive stock options. However, incentives from not having dividend protection for options appear to dominate those from antidilution, resulting in lower total payout for firms with higher options usage.

Regulators claim to reward firm cooperation in the enforcement process. However, critics question which actions constitute firm cooperation and contend that cooperation leads to \"harsh\" and \"unfair\" outcomes. Examining 1,162 enforcement actions for financial misrepresentation initiated by the Securities and Exchange Commission and Department of Justice, we find that regulator-cited cooperation credit is best explained by remedial actions and self-reported law violations. Cooperation credit is negatively associated with firm monetary penalties assessed by regulators. Our estimates suggest that firms with cooperation credit realize an average penalty reduction of $23.8 million (49 percent). We also estimate that average reputation-related losses are $756 million (70 percent) lower for firms with cooperation credit. We find no association between cooperation credit and related private action outcomes. Our results provide important insight into what constitutes meaningful cooperation with regulators, and suggest that the benefits can be substantial for firms deemed to be cooperative.

Considerable attention has been placed on internal monitoring mechanisms and their role in the turnover of the top management. Arguably one of the most important functions of the board of directors is to identify and hire suitable replacement managers, and the quality of the board's decision is ultimately judged by the performance of the firm following the replacement. In this study, I investigate the firm stock return and operating performance following a change in top management when the new CEO is characterized by the hiring firm as a turnaround specialist in the financial press. In a sample of 154 announcements from 1975 to 2000 of firms that hired turnaround specialists as CEO, the event day abnormal return was 9.52%, considerably higher than previous CEO turnover studies. The stock return performance of the turnaround specialist sample is significantly worse in the 24 months prior to appointment than from two control groups provided by Huson, Parrino, and Starks (2001) that replace a CEO following normal and forced removal of the prior CEO. The stock return performance of the turnaround specialist sample is no different in the 48 months following appointment from the normal and forced succession control groups and from a pre-event performance matched control group. Operating performance using either return on assets or gross margin is significantly lower in the year prior and year of CEO replacement for the turnaround specialist sample than either the normal and forced succession control groups or the performance matched control group. The subsequent operating performance of the turnaround specialist sample shows positive improvement from the fiscal year end prior to announcement to the second fiscal year end after. The performance improves to industry median levels and is no different from either the forced succession or performance matched control samples. Operating performance of the turnaround specialist firms return to the levels experienced two years prior to the appointment. This improvement is not due to accounting manipulations or mean reversion. Corporate control activity is significantly higher following the appointment of a turnaround specialist than any of the control samples as indicated by an examination of the firms that delisted from the major exchanges. A turnaround specialist is more likely to be appointed with factors that contribute to increased levels of financial distress. The probability of appointing a turnaround specialist increases with decreases in cash flow and return on assets and increasing debt levels. The operating performance improvement and the corporate control activity indicate the performance improvement of the turnaround specialists may lie in the redeployment of existing assets to higher valued uses.

SARS-CoV-2 enters host cells through an interaction between the spike glycoprotein and the angiotensin converting enzyme 2 (ACE2) receptor. Directly preventing this interaction presents an attractive possibility for suppressing SARS-CoV-2 replication. Here, we report the isolation and characterization of an alpaca-derived single domain antibody fragment, Ty1, that specifically targets the receptor binding domain (RBD) of the SARS-CoV-2 spike, directly preventing ACE2 engagement. Ty1 binds the RBD with high affinity, occluding ACE2. A cryo-electron microscopy structure of the bound complex at 2.9 Å resolution reveals that Ty1 binds to an epitope on the RBD accessible in both the ‘up’ and ‘down’ conformations, sterically hindering RBD-ACE2 binding. While fusion to an Fc domain renders Ty1 extremely potent, Ty1 neutralizes SARS-CoV-2 spike pseudovirus as a 12.8 kDa nanobody, which can be expressed in high quantities in bacteria, presenting opportunities for manufacturing at scale. Ty1 is therefore an excellent candidate as an intervention against COVID-19. Here, Hanke et al. immunize an alpaca with SARS-CoV-2 spike protein domains and identify a nanobody that binds the receptor binding domain of spike in both the up and down conformations and sterically hinders ACE2 engagement.