a. What financial impact does illegal corporate behavior have on a company?
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Read and analyze “Paying the Piper: An Empirical Examination of Longer-Term Financial Consequences of Illegal Corporate Behavior,” 40 Academy of Management Journal 129 (1997), by Melissa S. Baucus and David A. Baucus. Then answer the following questions. The Cost of Corporate Wrongdoing The Cost of Corporate Wrongdoing The Cost of Corporate Wrongdoing
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a. What financial impact does illegal corporate behavior have on a company?
Explanation
In this case ,Paying the piper was an investigation done to examine the long-term financial effect due to the illegal corporate behavior. It shows that the firm experience slower sales increment from third to fifth year and also showers low accounting returns over five years.
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Answer
Corporate behavior is the actions of a company or group who are acting as a single body. It defines the company's ethical strategies and describes the image of the company.
b. How long does a company feel the impact of illegal behavior?
Explanation
If a company is caught with illegal behavior it has to bear consequences for a long time .The stakeholders withdraw their shares from the company and it takes a long time to convince them that they were not involved in the corporate illegal behavior. It showers the organisation experiences slow sales increase from third to fifth year and slower accounting returns over five years
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Answer
Illegal behavior is behavior which the government discourages and the purpose of law is to keep order and influence conduct.
c. How does the market react to illegal corporate behavior?
Explanation
The company should be punished for the wrongdoings If a company is caught with illegal behavior it affects both internal and external environments.The stakeholders withdraw their shares from the company and it takes a long time to convince them that they were not involved in the corporate illegal behavior. It showers the organisation experiences slow sales increase from third to fifth year and slower accounting returns over five years
Answer
Corporate behavior is the actions of a company or group who are acting as a single body. It defines the company's ethical strategies and describes the image of the company.
d. What are the financial costs of violating the law?
Explanation
References;
Baucus, M. S., & Baucus, D. A. (1997). Paying the piper: An empirical examination of longer-term financial consequences of illegal corporate behavior. Academy of Management Journal, 40(1), 129-151.
Answer
According to Melissa and David the financial consequences of illegal business practices by corporations is heavier than just court mandated fines. They explore how firms convicted for wrong doing suffered staggering drops in returns on asserts, sales imposed by the negative CSR as customers shun its products, to even increased cost of doing business when suppliers are affected. It highlights how multiple convictions are worse with each new conviction causing a larger drop than the previous one. Furthermore, it states that this has an effect that can spiral several years with significant changes coming years after the convictions, as well as immediately.
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