Cycles of Corporate Fraud: a Behavioural Economics Approach

Richard Fairchild, Oliver Marnet

Research output: Chapter or section in a book/report/conference proceedingChapter or section

Abstract

We analyse the combined effects of economic, behavioural, psychological, emotional, and psycho-analytical factors on the managerial propensity to commit corporate fraud. Becker (1973) suggested that criminals and fraudsters perform a fully-rational cost-benefit analysis of crime commission, an approach which advocates tougher financial regulation and stronger punishment threats to deter crime. Meanwhile, behavioural economics and Freudian psycho-analysis proposes that behavioural, psychological and emotional factors play a key role in the incidence of corporate fraud. We develop a behavioural game-theoretical and Freudian psycho-analytical framework of corporate fraud and consider the effect of a Freudian super-ego, acting as a moral compass, on managerial fraud. Furthermore, we analyse the contagious spread of fraud across an organisation from unethical to ethical managers. The chapter concludes with an in-depth review of policy makers and practitioners as they are beginning to appreciate and incorporate the behavioural economics approach in developing better policies to address corporate fraud.
Original languageEnglish
Title of host publicationResearch Handbook on Corporate Board Decision-Making
Subtitle of host publicationResearch Handbooks in Business and Management series
PublisherEdward Elgar Publishing Ltd
Chapter16
Pages367-401
Number of pages34
ISBN (Electronic)9781800377189
ISBN (Print)9781800377172
DOIs
Publication statusPublished - 15 Nov 2022

Publication series

NameResearch Handbooks in Business and Management
PublisherEdward Elgar

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