Fraud Transmission Mechanisms within Community: Peer Concealing and Hinting among Chinese Listed Corporations

Jing Zhang, Yuan Feng, Yuntao Bai and Yongjian Lin

Management and Organization Review, 2023, vol. 19, issue 5, 1005-1038

Abstract: We explored the transmission mechanisms of corporate fraud and its punishments within social network communities. Using fraud triangle theory and trust triangle theory, we hypothesize four transmitting channels of how fraud commission and detection are affected by peers’ fraud and punishment. Based on Chinese listed corporations from 2008 to 2018, we first construct and detect interlocked social network communities with a community-detecting algorithm, and then examine hypotheses using a bivariate probit model with partial observability. Our findings indicate that peer-concealing and -hinting effects exist within social network communities. The peer-concealing effect decreases the likelihood of being detected when committing fraud, for those with more and closer fraudulent peers. The peer-hinting effect increases the likelihood of being detected when committing fraud, for those with more and closer punished peers. There is no evidence to support peer-contagion and vicarious-punishment effects. Thus, an improved understanding of the transmission mechanism of corporate fraud commission and detection within communities is provided to prevent and detect corporate fraud. In addition, stakeholders and regulators should be aware of the deviant subculture and social distancing in social network communities.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:maorev:v:19:y:2023:i:5:p:1005-1038_8

Access Statistics for this article

More articles in Management and Organization Review from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().