Corporate and securities laws are seen as mitigating corporate fraud by manipulating the incentives of agents: presenting corporate agents with a probability of being caught and punished if they commit fraud. This Article suggests that the same laws also affect corporate fraud in a significant but unappreciated manner, by manipulating the perceptions of the principals: affecting the principals' efforts in monitoring the agents by making them perceive the risk of fraud as more or less likely.
Counter-Cyclical Enforcement of Corporate Law,
Yale J. on Reg.
Available at: http://digitalcommons.law.yale.edu/yjreg/vol25/iss1/2