Managerial short-termism, ESG performance, and corporate financial Fraud: A heterogeneity analysis based on corporate ownership

Yan Wang and Shen Liu

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: This study explores the relationship among managerial short-termism, ESG performance, and corporate financial fraud, with a focus on the impact of ownership differences on this relationship. Through empirical analysis, the study finds a significant positive association between managerial short-termism and financial fraud, indicating that managers, in pursuit of short-term performance, may resort to fraudulent financial reporting to embellish financial statements. Furthermore, ESG performance exhibits a significant negative effect on financial fraud, with strong ESG performance effectively reducing the incidence of financial fraud. Mediation analysis further reveals that ESG performance serves as an intermediary in the relationship between managerial short-termism and financial fraud; specifically, managerial short-termism indirectly exacerbates financial fraud by diminishing ESG performance. The study also demonstrates heterogeneity in the relationship between managerial short-termism and financial fraud across different ownership types, particularly between state-owned and non-state-owned enterprises, where the impact of managerial short-termism on financial fraud differs significantly. Based on these findings, this paper proposes policy recommendations including strengthening corporate governance structures, enhancing ESG performance, implementing differentiated regulatory policies, and reinforcing managerial training to reduce financial fraud and promote sustainable corporate development.

Keywords: Managerial short-termism; ESG performance; Corporate financial fraud; Corporate ownership (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025005489

DOI: 10.1016/j.iref.2025.104385

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