Does digital transformation affect corporate fraud?

Bing Wang, JiaJia Luo, Xuejiao Zhang and Lei Gao

Finance Research Letters, 2025, vol. 80, issue C

Abstract: Previous studies have provided mixed evidence regarding the impact of digital transformation on firm behavior. Using data from Chinese listed firms, we find that digital transformation increases the likelihood of corporate fraud by raising business complexity, financing constraints, and oversight challenges, highlighting the associated risk impacts. However, strong internal controls, analyst coverage, and auditor professional competence can mitigate this risk. Notably, state-owned and high-income firms do not experience these risk impacts. Our findings underscore the potential risks posed by digital transformation, clarify the theoretical relationship between digital transformation and fraud, and offer practical insights for informing government policy improvements.

Keywords: Digital transformation; Corporate fraud; Risk effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006786

DOI: 10.1016/j.frl.2025.107418

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