When a corporation settles a major criminal investigation with a deferred or a non prosecution agreement, the stock of the company usually goes up.

But when the company pleads guilty?

Two professors at SUNY Canton say that corporate crime doesn’t pay for a company trying to gain or retain investors.

Professor Brian K. Harte, Ph.D., and Assistant Professor Umesh Kumar, Ph.D., recently received a best paper in session award at the Academy of Business Research fall international conference. Their presentation, “Investor Response to Convicted Firms Within and Outside of the United States,” examines stakeholders’ reaction to firms convicted of corporate wrongdoing.

Corporate crimes, even those committed outside of the United States result in a loss in investors’ confidence, the professors found.

These crimes also result in a loss of firm value in the long-term.

This effect was found to be more significant when a firm is convicted for corporate crimes within the United States.

“Corporate crimes dent investors’ confidence severely,” Harte said. “It is important from an investors’ perspective to know whether or not a firm is convicted and the associated size of monetary penalties received for firms’ both inside and outside of the United States.”

Top global firms have been prosecuted and penalized for their corporate delinquency, including antitrust, fraud, environmental, health and safety laws, among other statutes.

The researchers analyzed 127 businesses from the top global firms during 2001-2010.

“Our stock research tools reports show that investors punish convicted firms by lowering equity premium,” Kumar said. “The higher the penalty imposed on firms convicted for crimes outside the United States, the higher the negative response is from investors.”

The two faculty members said they will be publishing their research at a later date.