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The Press as a Watchdog for Accounting Fraud


  • I thank an anonymous referee, Jeff Abarbanell, Mary Barth, Sudipta Basu, Brian Bushee, Fabrizio Ferri, Stu Gilson, Cristi Gleason, Michelle Hanlon, Paul Healy, Jack Hughes, Amy Hutton, Bruce Johnson, Bob Kaplan, Tom Lys, Michael Maher, Maureen McNichols, Doug Skinner, Ross Watts, Greg Waymire, and Joe Weber as well as workshop participants at Boston College, Emory University, Harvard Business School, Massachusetts Institute of Technology, Notre Dame University, The Ohio State University, University of Iowa, University of Michigan, University of Texas-Austin, the 2004 Duke/UNC Fall Accounting Camp, and the 2003 Stanford Summer Camp, and several anonymous members of the press for comments on earlier versions of this paper. I thank Sarah Eriksen, Anne Karshis, and Kathleen Ryan for research assistance. I am grateful for the funding of this research by the Harvard Business School.


This paper investigates the press's role as a monitor or “watchdog” for accounting fraud. I find that the press fulfills this role by rebroadcasting information from other information intermediaries (analysts, auditors, and lawsuits) and by undertaking original investigation and analysis. Articles based on original analysis provide new information to the markets while those that rebroadcast allegations from other intermediaries do not. Consistent with a dual role for the press, I find that business-oriented press is more likely to undertake original analysis while nonbusiness periodicals focus primarily on rebroadcasting. I also investigate the determinates of press coverage, finding systematic biases in the types of firms and frauds for which articles are published. In general, the press covers firms and frauds that will be of interest to a broad set of readers and situations that are lower cost to identify and investigate.