ESG performance and corporate fraud: Evidence based on the MOE framework

Yanyang Sun, Jun Gao, Wenruo Wu and Suyi Liu

International Review of Financial Analysis, 2025, vol. 97, issue C

Abstract: We investigate the impact of ESG performance on corporate fraud within publicly listed firms in China. Our results show that higher ESG performance significantly inhibits corporate fraud. Mechanism analysis reveals that ESG performance mitigates corporate fraud by easing financial constraints, attracting analyst coverage, enhancing internal control, and alleviating pressures from declining performance. Additional analysis suggests that the impact of ESG performance on corporate fraud is more pronounced in non-state-owned enterprises and firms with high levels of uncertainty perception. These findings have important implications for regulators, investors, and policymakers to promote ESG practices to mitigate corporate fraud.

Keywords: ESG rating; Corporate fraud; Financial constraints; Supervision levels; Corporate performance pressure (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007397

DOI: 10.1016/j.irfa.2024.103807

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