When rationality fails: Making sense of the 'slippery slope' to corporate fraud
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Campana, P. (2015). When rationality fails: Making sense of the 'slippery slope' to corporate fraud. Theoretical Criminology https://doi.org/10.1177/1362480615612147
Management fraud is often explained through wealth-maximisation paradigms. This paper invokes a different approach, namely a behavioural one, and argues that fraud may happen as a consequence of failures in the decision-making process. Relying on extensive evidence in the case of Parmalat, it maintains that this fraud was not brought about by the desire of the CEO, chairman and founder to maximise his economic goals, but was rather a consequence of his failure to produce an objective description of reality. This was induced by a number of behavioural mechanisms such as self-deception, managerial hubris, emotions and the ‘endowment effect’. This paper also contributes to a broader debate on the rationality of economic actors and its limits, and sheds light on the seeds of potential crises contained within genuine Schumpeterian entrepreneurs.
management fraud, rationality failures, self-deception, overconfidence, emotions, behavioural law and economics
This work has received generous financial support from the Centre for Corporate Reputation, Said Business School Oxford, which I gratefully acknowledge.
External DOI: https://doi.org/10.1177/1362480615612147
This record's URL: https://www.repository.cam.ac.uk/handle/1810/251134
Attribution-NonCommercial 4.0 International
Licence URL: http://creativecommons.org/licenses/by-nc/4.0/
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