Public Governance and Corporate Fraud: Evidence from the Recent Anti-corruption Campaign in China

Jian Zhang ()
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Jian Zhang: Southwestern University of Finance and Economics

Journal of Business Ethics, 2018, vol. 148, issue 2, No 11, 375-396

Abstract: Abstract Taking advantage of the China’s recent anti-corruption campaign, we attempt to examine the effect of public governance on a firm’s incentive to commit fraud. Using enforcement actions data from the Chinese Securities Regulatory Commission (CSRC) from 2004 to 2014, we find that, due to enhanced public governance, firms are less likely to commit fraud in the post-campaign period than in the pre-campaign period. We further show that the effect of public governance is more evident in privately held listed firms, in firms with weak legal environment, and in firms in areas with poor local economies. In addition, we find that older CEOs respond less actively to the public governance caused by anti-corruption regulations. This paper offers clear policy implications for business ethics by indicating that public governance provides external monitoring of corporate decisions.

Keywords: Corporate fraud; Anti-corruption; Chinese government; Public governance (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (48)

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DOI: 10.1007/s10551-016-3025-x

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