EconPapers    
Economics at your fingertips  
 

Fraud commitment in a smaller world: Evidence from a natural experiment

Jiacai Xiong, Caiyue Ouyang, Jamie Yixing Tong and Feida Frank Zhang

Journal of Corporate Finance, 2021, vol. 70, issue C

Abstract: This study examines the effect of proximity on corporate fraud commitment using the introduction of high-speed rail (HSR) as an exogenous shock to travel time. We find that firms commit less corporate fraud after the introduction of an HSR route. A dynamic difference-in-differences (DiD) analysis shows that the effect of HSR introduction on fraud only occurs after the HSR route is launched, supporting the parallel trends assumption and confirming the causal relationship. Further analysis shows that the negative impact of HSR introduction on corporate fraud is more pronounced for firms that have higher information asymmetry or weaker monitoring mechanisms in the pre-HSR period. In addition, we find that HSR introduction increases corporate site visits by external monitors and that visits significantly reduce corporate misbehavior. Overall, our findings suggest that HSR introduction increases proximity and thereby reduces the information acquisition costs for outside monitors. As a result, outside monitors are in a better position to oversee firms, leading to decreased fraud commitment.

Keywords: High-speed railway; Information acquisition; Acquisition cost; Fraud commitment (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119921002121
Full text for ScienceDirect subscribers only

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:eee:corfin:v:70:y:2021:i:c:s0929119921002121

DOI: 10.1016/j.jcorpfin.2021.102090

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2023-09-20
Handle: RePEc:eee:corfin:v:70:y:2021:i:c:s0929119921002121