Hand in the (Pot) Cookie Jar: Does Employee Substance Abuse Predict Financial Fraud?

• In Event: DSFI: Part II

Abstract

We examine the relation between employees’ substance abuse history and their likelihood of committing workplace financial fraud. In our sample of white collar professionals, the 1% of employees struggling with substance abuse problems are responsible for 9% of workplace financial frauds. We find that this increased fraud risk is most severe for serial substance abusers and almost completely mitigated after a few years of sobriety. These results are consistent with prior research indicative of substance abuse leading to neurological damage characterized by steep delay discounts and more willingness to risk long run earnings for an immediate payoff.

Author

• Xin Zheng, Emory University