 Does the form of state ownership and political connections influence the incidence of financial statement fraud?Yang Wang, John K. Ashton and Jia Liu The European Journal of Finance, 2024, vol. 30, issue 18, 2111-2136 Abstract: Do forms of state ownership and politically connected senior management affect the incidence of financial statement fraud? In this study, we consider these questions and provide new evidence as to the factors influencing fraud commission and detection for Chinese listed firms between 2007 and 2018. Six major types of financial statement fraud activities are identified. Using a bivariate probit model, developed to address partial observability concerns, we report state ownership lowers the likelihood of fraud detection, while increasing a firms’ propensity to commit fraud. In addition, state-owned enterprises (SOEs) controlled by local government are more likely to engage in fraud and escape regulatory punishments, relative to SOEs controlled by central government. The effect of politically connected senior management over fraud commission or regulatory detection is also diluted by the presence of state ownership. Moreover, the role of state ownership in encouraging fraud commissions and escaping from regulatory punishments is more pronounced for the local non-politically connected SOEs. Date: 2024 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:30:y:2024:i:18:p:2111-2136 Ordering information: This journal article can be ordered from DOI: 10.1080/1351847X.2024.2363421 Access Statistics for this article The European Journal of Finance is currently edited by Chris Adcock More articles in The European Journal of Finance from Taylor & Francis Journals |
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