How pervasive is corporate fraud?

Abstract We provide a lower-bound estimate of the undetected share corporate fraud. To identify hidden part “iceberg,” we exploit Arthur Andersen’s demise, which triggered added scrutiny on former clients and thereby increased detection likelihood preexisting frauds. Our evidence suggests that in normal times only one-third frauds are detected. average 10% large publicly traded firms committing securities fraud every year, with 95% confidence interval 7%-14%. Combining pervasiveness existing estimates costs detected fraud, destroys 1.6% equity value each equal to $830 billion 2021.