Search results

The purpose of the research is to determine the essence and notion of economic violation of law and their varieties, and to determine the reasons that lie in the basis of this negative social phenomenon. The authors use the philosophical law of integrity and struggle of contradictions and rather-legal, historical and legal, and formal and legal methods of scientific cognition. Such laws of dialectics and transition of quantitative changes into qualitative changes, negation of negation, and others are used. Signs and types of economic violations of law are analyzed and their predetermination by the conflict character of economic relations is noted. Comparison of economic violations of law that are peculiar for administrative and market models of economy is performed. The universal character of economic relations as objects of legal protection is shown. Classification of economic violations of law, based on the level of their public danger and spheres of distribution, is provided. Special attention is paid to civil and legal violations of law as a variety of economic violations of law, based on not anti-social settings of the subject but conflict with the borrowed system of values, which is alien to most members of society. The notion “economic violation of law” is of the collective character and includes illegal actions regarding economic relations, and the latter are of the conflict character due to different interests of subjects, the existing competition, and striving for obtaining profit. Economic violation of law is an illegal form of solving the existing conflict, which leads to application of measures of legal responsibility. The causes of economic violations of law could be overcome by implementation of the values and ideals of justice in the legal norms. They should be based on historical, cultural, spiritual, and legal traditions. All that is imposed artificially is destined for rejection and creation of new conflicts, including economic violations of law.

This study examines how creditor interventions after debt covenant violations affect corporate tax avoidance. Using a regression discontinuity design, we find that creditor interventions increase borrowers' tax avoidance. This effect is concentrated among firms with weaker shareholder governance before creditor interventions and among those with less bargaining power during subsequent debt renegotiations. Our results indicate that creditors play an active role in shaping corporate tax policy outside of bankruptcy.

With the rise of employer-promulgated mandatory employment arbitration, scholars have become concerned that these policies may reduce the economic viability of lower value employment claims. Of particular worry are claims made under the Fair Labor Standards Act since the FLSA does not include punitive damages. This study empirically tests the relationship between 368 Fortune 1000 companies’ employment arbitration policies and their wage and hour violations discovered during the Department of Labor inspections. Surprisingly, firms that used arbitration were found to have fewer violations and lower back wages for those violation compared to firms that did not use arbitration. This suggests that viewing arbitration merely as a cost-reduction tool may cast the practice too narrowly and instead it may be part of a larger conflict management system that seeks to address conflict at the earliest possible stage.

Purpose — The main aim of the paper is to study the occurrence and connections of different pre-insolvency violations of law on the example of Estonian firms.Design/methodology/approach — The study is based on the whole population financial data of Estonian bankrupt firms and all publicly available court judgments about firm insolvencies from the period 2002–2009. Three types of violations have been considered: non-submission of annual reports, violations of net asset requirement and elements of criminal offence.Findings — The paper shows that non-submission of annual reports is common for insolvent firms but its occurrence varies through insolvency years and types. A similar finding can be attributed to net asset requirement violations. Elements of criminal offence are also frequent, but their occurrence is not different through insolvency years, industries and firm size groups. Elements of criminal offence and net asset requirement violations are not likely to exist together. Although medians of several pre-insolvency financial variables are significantly different in case of firms where criminal offence elements were found, they are not useful for offence prediction.Research limitations/implications — Statistical analysis limitations of the current study are mainly associated with the content of the data, because the dataset itself covers the whole population of publicly available information. The application of some results in different countries might be limited because of differences in legislation and its implementation. The study outlines novel information about and connections of different pre-insolvency violations which could be applied for relevant theory-building or more elaborate empirical research in the future.Practical implications — The study can be used by managers, owners, creditors and other stakeholders of firms to improve detection of possible pre-insolvency violations.Social implications — Regulators and regulation implementers can make use of the study when considering a change in legal framework or in its practice.Originality/value — The paper shows the presence of selected pre-insolvency violations on an extensive dataset. Previous studies have mainly been theoretical, qualitative or using small datasets.

This paper aims to help auditors manage the risk of Foreign Corrupt Practices Act (“FCPA”) violations of the companies that they audit, particularly those with operations in Latin America.

First, the paper describes the relevant provisions of the FCPA. Second, it identifies the common schemes and transactions associated with heightened risk of FCPA liability in Latin America and provides recommendations to minimize this risk. Third, it discusses the responsibilities of auditors under U.S. securities laws and regulations with respect to the FCPA violations of their clients. Finally, it describes the sanctions that auditors could face if they fail to fulfill their responsibilities regarding these FCPA violations. The paper is based on data collected from various documents including laws, cases, accounting and auditing standards, litigation releases, press releases, deferred prosecution agreements, and enforcement actions.

Auditors have a responsibility under Section 10A(a) of the Exchange Act to design procedures that provide reasonable assurances of detecting the FCPA violations of their clients, which are illegal acts with direct and material effects on the financial statements. In addition, auditors have a responsibility under Section 10A(b) of the Exchange Act to report the violations of the FCPA that they detect during the audit to the appropriate level of management. If management does not take the necessary remedial steps, auditors must report FCPA violations to the U.S. Securities and Exchange Commission. In order to reduce their FCPA-related liability and fulfill their responsibilities under U.S. securities laws and accounting standards, auditors should closely scrutinize transactions with a high risk of FCPA liability. An analysis of FCPA cases occurring in Latin America reveals six categories of transactions with heightened FCPA risk.

While there is much literature regarding a company’s compliance with the FCPA, there has not been much literature about the auditor’s responsibilities with respect to the FCPA violations of their clients. This paper attempts to start bridging this gap by providing guidance to auditors regarding their responsibilities to detect and report FCPA violations.

Framed by the intersectionality perspective and results from prior research, we examined the effects of race/ethnicity, gender, probation violations, and type of violation on juvenile justice case outcomes in a Mid-Atlantic state.

Bivariate and multivariate analyses in the form of logistic regression were used to assess the extent race and ethnicity, gender, probation violations, and the type of violation, individually and in combination, impact case outcomes.

The findings indicate that the race/ethnicity of the youth, his or her gender, and whether involved in a probation violation and to some degree the type of violation, individually and in some cases, jointly, effect juvenile justice decision making. These relationships often involve receiving both harsh and lenient outcomes. We interpret the results as evidence that stereotyping plays out differently when race/ethnicity and gender intersect.

The study contributes to the general literature by (1) examining the neglected combination effects of race/ethnicity and gender with increased social control within juvenile justice proceedings; (2) including Hispanic youth; and (3) looking at the interrelationships among race/ethnicity and gender with the treatment of probation violators.

The KOSPI 200 options at its initial stage generated a significant number of violations in no-arbitrage conditions which involve both options and the underlying index. However, when the arbitrage conditions are formed independent of the underlying index, the average size of violation is not large and few arbitrage opportunities exist. There are more frequent violations on near-maturity days, with in-the-money options and larger violation sizes during opening and closing hours. The arbitrage opportunities remain intact even after realistic transaction costs are taken into account and index futures prices are used instead of the stock index in an alternative specification.

We investigate the interaction of debt covenants and tax accounting on the adoption of Financial Interpretation No. 48 (FIN 48). We examine how firms respond to the potential tightening of covenant slack upon FIN 48 adoption and whether these actions are penalized by creditors and anticipated by equity markets. We find that upon FIN 48 adoption, the majority of sample corporate borrowers increase their tax reserves and reduce equity. Firms close to debt covenant violation were even more likely to increase tax reserves upon FIN 48 adoption; however, the size of the adjustment was relatively smaller, suggesting that the FIN 48 standards limited, but did not eliminate, firms use of discretion in reporting uncertain tax positions to avoid costly covenant violations. For firms near net worth debt covenant violation, the act of decreasing equity upon FIN 48 adoption imposes real economic costs, as the average cost of debt increased by 43 basis points. Finally, we extend prior research on the market response to FIN 48 by showing how the market response to FIN 48 adoption is a function of debt covenant slack and tax aggressiveness. Specifically, the cumulative abnormal return at the FIN 48 exposure draft release date is negative only for tax aggressive firms that are close to debt covenant violation.