The first analysis examines the proportion of firms the press identifies
as having questionable accounting. Table 2 shows that 75 of the 263 firms
(approximately 29%) are identified by the press prior to the SEC or firm’s
public announcement. An interaction of the percentage of firms caught
and the last year of the fraud finds no discernable pattern. Thus, the press’s
actions as a watchdog of accounting fraud appear to have remained constant
over the time of my study.
It is possible that the press frequently writes negative articles regarding
firms’ accounting and thus the 29% finding is consistent with the level of
press questioning of all firms. In that case, the press’s inability to sort out
malfeasances from legitimate accounting reduces their value as monitors