The Effect of Detected Financial Reporting Misconduct on Gross Domestic Product and Unemployment in the United States

Abstract

The relationship between corporate accounting fraud and macroeconomic downturns represents an enormous opportunity to better understand the landscape of the American market, and yet this remains one of the most under-researched topics in the field. While most modern research focuses on the incentives behind the executives committing fraud, very little has been done in the way of determining how these actions impact greater society both directly and inadvertently in the form of macroeconomic aftermath. Understanding if and how instances of financial reporting misconduct can be used as a predictor of changes in economic conditions could be an invaluable addition to the toolbox of future economists. Additionally, creating an effective model that predicts the relationship between these variables has the potential to inform consumers by helping to explain how the rate of fraud detection can impact the economy. The following research explores the relationship between financial reporting misconduct and the economy at large.