The Role of Accounting in Ponzi Schemes

What is it about?

When falsified accounting reports are not a necessary component of a fraud, how often are they provided and what effect do they have on potential investors? We answer this question in a sample of Ponzi schemes, where fraudsters have discretion in whether to provide no accounting statements or provide falsified accounting statements. We observe that the provision of falsified accounting statements increases investment and decreases the likelihood of regulatory detection.

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