Corporate Scandals and Household Stock Market Participation

Mariassunta Giannetti, Tracy Yue Wang

Research output: Contribution to journalArticlepeer-review

128 Scopus citations


We show that, after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease holdings in fraudulent as well as nonfraudulent firms, even if they do not hold stocks in fraudulent firms. Within a state, households with more lifetime experience of corporate fraud hold less equity. Following the exogenous increase in fraud revelation due to Arthur Andersen's demise, states with more Arthur Andersen clients experience a larger decrease in stock market participation. We provide evidence that the documented effect is likely to reflect a loss of trust in the stock market.

Original languageEnglish (US)
Pages (from-to)2591-2636
Number of pages46
JournalJournal of Finance
Issue number6
StatePublished - Dec 1 2016

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© 2016 the American Finance Association


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