Financial Fraud: A Literature Review

This chapter provides a descriptive account of the different forms of fraudulent behaviour in the context of financial market activities, the prevalence and consequences of such behaviour as identified by previous research, and the market structures that scholars believe facilitate this behavior. To assess the current status and future performance of the issuer and ultimately to establish the perceived value of a financial instrument, both accurate information and the expertise necessary to interpret that information are essential. To make the empirical universe of financial fraud intelligible and to structure the survey presented in this chapter, a conceptual distinction is made between three types of financial fraud: false financial disclosures, financial scams, and fraudulent financial mis-selling. Where both false financial disclosures and financial scams involve plain lies, financial mis-selling practices evolve around suggestive communications that create misleading impressions, but do not involve mis-statements of facts.