Does local competition and firm market power affect investment adviser misconduct?

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Does local competition and firm market power affect investment adviser misconduct? / Gelman, Michael; Khan, Zaheer; Shoham, Amir; Tarba, Shlomo Y.

In: Journal of Corporate Finance, Vol. 66, 101810, 02.2021.

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@article{47d644b28fe443bfb62122e31edb7335,
title = "Does local competition and firm market power affect investment adviser misconduct?",
abstract = "This paper examines the impact of local competition and local firm market power on misconduct by analyzing the investment adviser market. The study is based on an extensive sample of more than 3.8 million employee-year observations of investment advisers resulting in 709,416 firm-county-year observations over 12 years. The findings show that a firm's county-level market power and county market competition have a negative influence on investment adviser misconduct. The result is robust to a battery of empirical tests. We show that a firm exhibits lower levels of misconduct in counties in which it has greater local market power. We also identify the effect of local competition and market power on misconduct using two exogenous shocks, mergers and acquisitions (M&As) and the end of a local monopoly. We establish adviser employment stability as a novel channel for explaining the impact of local competition and firm market power on misconduct.",
keywords = "Corporate fraud, HHI, Investment adviser, Local competition, Local market power, Misconduct",
author = "Michael Gelman and Zaheer Khan and Amir Shoham and Tarba, {Shlomo Y.}",
note = "Publisher Copyright: {\textcopyright} 2020 Elsevier B.V.",
year = "2021",
month = feb,
doi = "10.1016/j.jcorpfin.2020.101810",
language = "English",
volume = "66",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Does local competition and firm market power affect investment adviser misconduct?

AU - Gelman, Michael

AU - Khan, Zaheer

AU - Shoham, Amir

AU - Tarba, Shlomo Y.

N1 - Publisher Copyright: © 2020 Elsevier B.V.

PY - 2021/2

Y1 - 2021/2

N2 - This paper examines the impact of local competition and local firm market power on misconduct by analyzing the investment adviser market. The study is based on an extensive sample of more than 3.8 million employee-year observations of investment advisers resulting in 709,416 firm-county-year observations over 12 years. The findings show that a firm's county-level market power and county market competition have a negative influence on investment adviser misconduct. The result is robust to a battery of empirical tests. We show that a firm exhibits lower levels of misconduct in counties in which it has greater local market power. We also identify the effect of local competition and market power on misconduct using two exogenous shocks, mergers and acquisitions (M&As) and the end of a local monopoly. We establish adviser employment stability as a novel channel for explaining the impact of local competition and firm market power on misconduct.

AB - This paper examines the impact of local competition and local firm market power on misconduct by analyzing the investment adviser market. The study is based on an extensive sample of more than 3.8 million employee-year observations of investment advisers resulting in 709,416 firm-county-year observations over 12 years. The findings show that a firm's county-level market power and county market competition have a negative influence on investment adviser misconduct. The result is robust to a battery of empirical tests. We show that a firm exhibits lower levels of misconduct in counties in which it has greater local market power. We also identify the effect of local competition and market power on misconduct using two exogenous shocks, mergers and acquisitions (M&As) and the end of a local monopoly. We establish adviser employment stability as a novel channel for explaining the impact of local competition and firm market power on misconduct.

KW - Corporate fraud

KW - HHI

KW - Investment adviser

KW - Local competition

KW - Local market power

KW - Misconduct

UR - http://www.scopus.com/inward/record.url?scp=85097469346&partnerID=8YFLogxK

U2 - 10.1016/j.jcorpfin.2020.101810

DO - 10.1016/j.jcorpfin.2020.101810

M3 - Article

AN - SCOPUS:85097469346

VL - 66

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

SN - 0929-1199

M1 - 101810

ER -