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Whistleblowers are ostensibly a valuable resource to regulators investigating securities violations, but whether there is a link between whistleblower involvement and the outcomes of enforcement actions is unclear. Using a dataset of employee whistleblowing allegations obtained from the U.S. government and the universe of enforcement actions for financial misrepresentation, we find that whistleblower involvement is associated with higher monetary penalties for targeted firms and employees and with longer prison sentences for culpable executives. We also find that regulators more quickly begin enforcement proceedings when whistleblowers are involved. Our findings suggest whistleblowers are a valuable source of information for regulators who investigate and prosecute financial misrepresentation. This article is protected by copyright. All rights reserved

This paper examines whether managers attempt to mitigate the negative outcomes of financial misconduct by altering the tone of required disclosures. Using a series of difference-in-differences analyses, we show that following fraudulent activity, managers use more negative and litigious words in disclosures, as compared to a matched sample of control firms. We find managers that have a larger set of negative outcomes, such as those with foreknowledge of the fraud committed, are more aggressive in altering disclosure when compared to peer firms. Our results also suggest that negative outcomes due to financial misconduct, such as monetary fines and reputation loss, are mitigated by altering the tone in financial disclosures. Altogether, we conclude that managers alter disclosures to reduce the set of negative outcomes they face following securities law violations.

Whistleblowers are ostensibly a valuable resource to regulators investigating securities violations, but whether there is a link between whistleblower involvement and the outcomes of enforcement actions is unclear. Using a dataset of employee whistleblowing allegations obtained from the U.S. government and the universe of enforcement actions for financial misrepresentation, we find that whistleblower involvement is associated with significantly higher monetary penalties for targeted firms and employees, and with significantly longer prison sentences for culpable executives. We also find enforcement actions involving whistleblowers are associated with significantly longer regulatory proceedings. Our findings contribute empirical evidence on the role of whistleblowers in the enforcement process and inform managers and policymakers, and the regulators who utilize these programs in their enforcement efforts.

Six years had passed between the publication of The Autumn of the Patriarch and Chronicle of a Death Foretold . The new book, brief as it was, sold in its millions around the world and convinced the critics that Garcia Marquez was back with a vengeance and capable, literarily speaking, of almost anything. In December 1982 the award of the Nobel Prize in Literature to the Colombian was probably the most popular decision made by the Swedish Academy in the second half of the twentieth century. In his acceptance speech in Stockholm, he pleaded for greater sympathy for the Latin American continent from which he came and which, by now, he felt entitled to represent. He spoke of a region still unknown and neglected, a region which was indeed magical but not in an irrational way, a region consistently subjected to the travesty of being judged by the standards of Europe in terms of culture and politics when Europe, which had many unhappy ghosts walking its corridors and skeletons rattling its closets, had taken a thousand years to achieve what it expected Latin America to have achieved in two hundred. ‘Allow us to live out our own Middle Ages,’ he declared, ‘so that our peoples, despite all their misfortunes, may have a second chance upon the earth’.

How does a child born in a small tropical town grow up to become a great writer? As a small boy Gabriel Garcia Marquez drew accomplished pictures well before he could read and write, and his early experience in a Montessori school may have helped him acquire the remarkable sensuality and plasticity so evident in his literary art. The first work he remembered reading was the One Thousand and One Nights , in which Scheherazade manages to survive by enchanting the murderous caliph with the hypnotic beauty of her storytelling – an appropriate antecedent, perhaps, for any Latin American child wishing to be a writer in that most politically risky of continents. Later, adding to the exotic impact of that magical serial, he read such typical boyish adventure stories as The Count of Monte Cristo , Treasure Island and the tales of Salgari, novels written by masters of narrative, the sort of books which some writers forswear as they become more sophisticated but which for him remained eternal classics of the storyteller’s art. In high school in Zipaquira , as a romantic adolescent, he turned to poetry. Few countries in Latin America were traditionally more committed to poetry, as against the novel, than Colombia. (Chile and Nicaragua would be two further examples.) In the 1940s, when Garcia Marquez was a student, Colombian poetry boasted a movement called Piedra y Cielo (Stone and Sky), ef ectively a national continuation of the avant-garde movements in Spain and Latin America in the 1920s and 1930s, whose most notable representatives were Spain’s Federico Garcia Lorca and Chile’s Pablo Neruda – though all the poets of their generation owed a vast debt to the end-of-the-century Nicaraguan modernist Ruben Dario , whom Garcia Marquez himself would always revere.

We analyze Berkshire Hathaway’s equity portfolio over the 1976 to 2006 period and explore potential explanations for its superior performance. Contrary to popular belief, we find Berkshire Hathaway invests primarily in large-cap growth rather than “value” stocks. Over the period the portfolio beat the benchmarks in 27 out of 31 years, on average exceeding the S&P 500 Index by 11.14%, the value-weighted index of all stocks by 10.92%, and a Fama and French characteristic-based portfolio by 8.56% per year. Although beating the market in all but four years can statistically happen due to chance, incorporating the magnitude by which the portfolio beats the market makes a luck explanation extremely unlikely even after taking into account ex-post selection bias. We find that Berkshire Hathaway’s portfolio is concentrated in relatively few stocks with the top five holdings averaging 73% of the portfolio value. While increased volatility is normally associated with higher concentration we show the volatility of the portfolio is driven by large positive returns and not downside risk. The market appears to under-react to the news of a Berkshire Hathaway stock investment since a hypothetical portfolio that mimics the investments at the beginning of the following month after they are publicly disclosed also earns significantly positive abnormal returns of 10.75% over the S&P 500 Index. Our evidence suggests the Berkshire Hathaway triumvirates of Warren Buffett, Charles Munger, and Lou Simpson posses’ investment skill unlikely to be explained by Efficient Market Theory.

We examine the penalties imposed on the 585 firms targeted by SEC enforcement actions for financial misrepresentation from 1978–2002, which we track through November 15, 2005. The penalties imposed on firms through the legal system average only $23.5 million per firm. The penalties imposed by the market, in contrast, are huge. Our point estimate of the reputational penalty—which we define as the expected loss in the present value of future cash flows due to lower sales and higher contracting and financing costs—is over 7.5 times the sum of all penalties imposed through the legal and regulatory system. For each dollar that a firm misleadingly inflates its market value, on average, it loses this dollar when its misconduct is revealed, plus an additional $3.08. Of this additional loss, $0.36 is due to expected legal penalties and $2.71 is due to lost reputation. In firms that survive the enforcement process, lost reputation is even greater at $3.83. In the cross section, the reputation loss is positively related to measures of the firm's reliance on implicit contracts. This evidence belies a widespread belief that financial misrepresentation is disciplined lightly. To the contrary, reputation losses impose substantial penalties for cooking the books.

MIGUEL Angel Asturias' Mulata de tal (1963) is what Spanish1 speaking critics are given to calling a novela-hiperbole, and it must be treated as such. No respectable critical approach to this novel has yet been found, which is partly why so little has been written about it, and yet its intrinsic interest and its importance for an understanding of Asturias' literary development are unmistakable. No critic has made any serious effort to discuss the pre-Columbian background to Asturias' fiction, which, despite certain interpretations relying on Greek and Babylonian mythology, would seem the only sound approach. Indeed, as far as Mulata de tal is concerned, there can be no question that influences are largely preColumbian and wholly American.l There are innumerable elements on almost every page which are familiar to anyone who has read the Popol Vuh, the Anales de los Xahil, or El libro de los libros de Chilam Balam. The real problem is to decide exactly where each element comes from, what it represented to the Mayas (or, in the case of contemporary material, what it represents to their descendants)., and