Psychological Pathways to Fraud: Understanding and Preventing Fraud in Organizations

In response to calls for more research on how to prevent or detect fraud (ACAP, Final Report of the Advisory Committee on the Auditing Profession, United States Department of the Treasury, Washington, DC, 2008; AICPA, SAS No. 99: Consideration of Fraud in a Financial Statement Audit, New York, NY, 2002; Carcello et al., Working Paper, University of Tennessee, Bentley University and Kennesaw State University, 2008; Wells, Journal of Accountancy, 2004), we develop a framework that identifies three psychological pathways to fraud, supported by multiple theories relating to moral intuition and disengagement, rationalization, and the role played by negative affect. The purpose of developing the framework is twofold: (1) to draw attention to important yet under-researched aspects of ethical decision-making, and (2) to increase our understanding of the psychology of committing fraud. Our framework builds on the existing fraud triangle (PCAOB, Consideration of fraud in a financial statement audit. AU Section 316, , 2005) which is used by auditors to assess fraud risk. The fraud triangle is composed of three factors that, together, predict the likelihood of fraud within an organization: opportunity, incentive/pressure, and attitude/rationalization. We find that, when faced with the opportunity and incentive/pressure, there are three psychological pathways to fraud nestled within attitude/rationalization: (1) lack of awareness, (2) intuition coupled with rationalization, and (3) reasoning. These distinctions are important for fraud prevention because each of these paths is driven by a different psychological mechanism. This framework is useful in a number of ways. First, it identifies certain insidious situational factors in which individuals commit fraud without recognizing it. Second, it extends our knowledge of rationalization by theorizing that individuals use rationalization to avoid or reduce the negative affect that accompanies performing an unethical behavior. Negative affect is important because individuals wish to avoid it. Third, it identifies several other methods fraudsters use to reduce negative affect, each of which could serve as potential “psychological red flags” and helps predict future fraudulent behavior. Finally, our framework can be used as a theoretical foundation to explore several interventions designed to prevent fraud.     

合作保护品牌

美国海关实施品牌保护涉及到海关程序的多个方面,但海关的执法程序主要包括两个阶段：扣押与没收。在这两个阶段里,商标所有人可以亲自参与执法过程,告知海关如何识别他们的品牌,并且收集有关非法流入美国的伪造品信息。     

Some causes of interstate differences in community bank performance

This study assesses the relationship between the performance of community banks and conditions in their marketplaces over the 1994–2008 period. A panel model is used, in which the states serve as the panels, and focuses on banks termed community financial institutions (CFIs). Bank performance is measured by the return on assets (ROA). The ROAs are averaged for all CFIs in each state. Statewide ROAs are related to each state’s economic, demographic, and market structure characteristics. These state-level characteristics explain some of the variations in the performance of each state’s CFIs over time, and results are economically and financially reasonable. Fixed effects play a role, linking each state’s performance to unidentified factors unique to each state. The mild (but statistically significant) explanatory power of the economic/demographic variables suggests that CFI managers can effectively deal with economic/demographic changes in their marketplace, in contrast to the troubles of big banks.     

Seeing isn’t Believing: Understanding Diversity in the Timing of Strategic Response

There is general consensus in the strategy literature that successful firms alter strategy to address changes in their environments and enact more favourable conditions. Studies of organizational change suggest that this adjustment is not always made in a timely manner. Different beliefs about cause and effect have been established as a plausible explanation for differential responses to environmental change. This exploratory study of six pharmaceutical firms suggests more specifically that multiple concepts associated with environmental changes must be directly linked to organizational performance before new strategies are initiated. The results emphasize the importance of stress as a precursor to strategic response and have implications for the way we conceptualize `response' when referring to significant changes in strategy.     

The Effect of Golden Parachutes on Shareholder Wealth and Takeover Probabilities

This study seeks to determine whether stockholders experience increases in wealth due to a company's adoption of a golden parachute and resulting increased takeover bid probability. Market reaction to golden parachute adoption is examined by employing event analysis, logit analysis and metric regression. Our findings indicate that the adoption of a golden parachute does not signify an increased probability of a takeover bid, and stockholders experience a decrease in wealth.     

Institutionalization of organizational ethics through transformational leadership

Concerns regarding corporate ethics have grown steadily throughout the past decade. In order to remain competitive, many organizational leaders are faced with the challenge of creating an ethical environment within their organization. A model is presented showing the process and elements necessary for the institutionalization of organizational ethics. The transformational leadership style lends itself well to the creation of an ethical environment and is suggested as a means to facilitate the institutionalization of corporate ethics. Finally, the benefits of using transformational leadership are demonstrated through the components of a psychological contract, organizational commitment, and ethical culture to institutionalize organizational ethics.Dawn S. Carlson is a doctoral candidate in Organizational Behavior at the Florida State University. She teaches and conducts research in the areas of Organization Behavior, Ethics, and Human Resource Management. Dawn continues to be active in the Academy of Management and Southern Management Association. She recently presented a paper at the National Academy Meetings on Work/Nonwork Conflict.Dr. Pamela L. Perrewe is Associate Professor and Chairman of the Management Department in the College of Business at Florida State University. She teaches and conducts research in the areas of Organizational Behavior and Human Resource Management. Pam has recently co-authored a textbook entitled,Strategic Human Resource Management. She is a member of the Academy of Management, American Psychological Association, Decision Sciences Institute and the Southern Management Association (SMA). Recently, she was elected to the Board of Governors for SMA.     

The Impact of a Marginal Cost Increase on Price and Quality: Theory and Evidence from Airline Market Strikes

This paper examines the impact of a marginal cost increase for one firm on price and quality in a duopoly market. The results are derived theoretically and then tested empirically. The marginal cost increase is interpreted as an increase in the wage one firm pays its workers. The predictions are tested with two United States airline strikes during the 1990's. Quality is proxied in three ways: (1) the number of flights per day, (2) the percentage of flights cancelled, and (3) the percentage of flights arriving late. The results show that the strike coefficients for the effects on quality are most consistent with theoretical predictions when quality is measured as the number of flights per day. These results are encouraging because of the three measures of quality, it seems that number of flights per day is the measure of quality that is most controllable by the .rm. The strike coefficients for the direct effect on price are most consistent with theoretical predictions when quality rankings are determined by the percentage of flights cancelled. The strike coefficients for the total effect on price are most consistent with theoretical predictions when quality rankings are determined by the percentage of flights arriving late.     

Another look at the role of emotion in the organizational change: A process model

The paper proposes a cognitive–emotional model of organizational change. It is argued that employees' emotions go through four sequential but distinguishable stages in the organizational change process. In the first stage, primary appraisal induces emotions that are high in arousal, mixed in hedonic tones, and are anticipatory. In the second stage, the mixed emotional experiences give way to either positive or negative emotions as a result of the secondary appraisal. The emotional experience then affects employees' coping behaviors in the third stage. In the forth stage, discrete emotions that are evaluative and have distinct action tendencies are induced. Given this changing nature of employees' emotional experiences during the organizational change process, and considering emotions' influence on individuals' attitudes and behaviors, it is suggested that change agents adjust the timing and content of the information communicated in order to promote employee acceptance to change. Implications of this conceptualization are discussed, as are directions for future research.     

The Reform of Support Mechanisms for Upland Farming: Paying for Public Goods in the Severely Disadvantaged Areas of England

The incomes of hill‐farmers in ‘Less Favoured Areas’ of the UK have traditionally been supported by payments related to their production levels. Reform of the Common Agricultural Policy and changes in policy objectives within the UK imply a need to change this basis of support. We investigate the option of paying for public goods produced, focusing on landscape features and habitats. A choice experiment study is used to estimate willingness to pay for different landscape features in four Severely Disadvantaged Areas of England. We find significant differences in the value of landscape features, both within and across regions, and parallel differences in the aggregate value of different policy options for upland areas. We discuss briefly how this information could be included in a spatially differentiated payments scheme.