Do Directors’ Network Positions Affect Corporate Fraud?

Sen Zeng, Longjun Xiao, Xueyan Jiang, Yiqian Huang, Yanru Li () and Cao Yuan
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Sen Zeng: School of Management, Wuhan Polytechnic University, Wuhan 430023, China
Longjun Xiao: School of Management, Wuhan Polytechnic University, Wuhan 430023, China
Xueyan Jiang: School of Management, Wuhan Polytechnic University, Wuhan 430023, China
Yiqian Huang: School of Management, Wuhan Polytechnic University, Wuhan 430023, China
Yanru Li: School of Accounting, Zhongnan University of Economics and Law, Wuhan 430073, China
Cao Yuan: School of Mathematics and Computer Science, Wuhan Polytechnic University, Wuhan 430024, China

Sustainability, 2024, vol. 16, issue 15, 1-22

Abstract: Corporate fraud poses a significant obstacle for sustainable business development. Drawing on social network analysis, this paper used data originated from Chinese-listed companies from 2009 to 2022 and found that directors’ network position significantly mitigates corporate fraud. Mechanism tests indicated that the quality of external auditors and internal control play a mediating role in this relationship. Further analysis showed that the network positions of independent directors, non-independent directors, and female directors individually inhibit the inclination of corporate fraud when considering various types of directors. Of note, the busy director hypothesis was not applicable in explaining the impact of directors’ network position on corporate fraud. This study provides a new approach to improving the sustainability of enterprises in newly emerging markets via the analysis of director networks. It is also beneficial to the research on director networks and corporate fraud in companies, offering insights for corporate governance and fraud prevention in companies and regulatory agencies.

Keywords: sustainability; corporate fraud; directors’ network position; external auditors; internal controls (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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