What Causes Fraudulent Financial Reporting? Evidence Based on H Shares

Shih-Chung Yen

Emerging Markets Finance and Trade, 2013, vol. 49, issue S4, 254-266

Abstract: This paper investigates fraudulent financial reporting (FFR) in the China-based companies listed on the Hong Kong Stock Exchange (called H shares) in which Chinese government officials have a high degree of involvement and heavy impact on audit quality and corporate governance. It intends to find out the causes of FFR, the opportunities that make such reporting possible, and whether the presence of politically connected executives creates an environment that is conducive to FFR. The results show that the corporate environment most likely to lead to FFR is characterized by earnings management accounting practices.

Keywords: audit quality; corporate governance; earnings management; fraudulent reporting; political connections (search for similar items in EconPapers)
Date: 2013
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