Existing studies show that financial reporting frauds by errant firms cause declines in stock market valuations for non-errant rival firms (i.e., industry contagion effects). We posit that contagion effects may be mitigated by investors’ expectations of non-errant rivals exploiting product-market opportunities at the expense of errant firms. We apply the competitive dynamics literature to argue that non-errant rivals experience lower contagion effects when they have more available slack to engage in competitive actions. This effect is expected to strengthen when rival firms have previously deployed more resources for R&D and advertising investments or have higher prior market share growth to demonstrate effective deployments of available resources. These arguments are supported for contagion effects from reports of U.S. SEC investigations from 2001 to 2004. We contribute to research and practice by going beyond discussions on corporate governance to evaluations of key competitive attributes that investors assess when reacting to such frauds.

现有研究表明，错误公司的财务报告欺诈会导致非错误竞争对手公司的股票市场估值下降（即行业传染效应）。我们假设，投资者期望非错误的竞争对手以牺牲错误的公司为代价来利用产品市场机会，可以减轻传染效应。我们应用竞争动力学文献来论证，当非错误的竞争对手有更多的空闲时间来参与竞争行动时，他们会经历较低的传染效应。当竞争对手公司之前为研发和广告投资部署了更多资源或之前的市场份额增长更高以证明可用资源的有效部署时，这种影响预计会加强。美国报告的传染效应支持这些论点