The effects of financial crime on firm performance: evidence from Norway

Abstract

The purpose of this thesis is to investigate the effect of criminal activity, namely corruption, on firm performance for Norwegian firms. We investigate whether the announcement and conviction of corruption has affected the stock prices negatively, by computing abnormal returns. In addition, we examine a longer-term effect of corruption on firm performance measured by Return on Assets (ROA). The stock price reactions reveal minor significant abnormal returns related to the announcement of corruption, but show overall significant negative abnormal returns related to the conviction. Furthermore, in our accounting-based method, we also find evidence of a diminished firm performance of the corrupt companies after the conviction. We conclude that financial crime does have an effect on firm performance and identify the effect as negative.