Ultimate Control Rights and Corporate Fraud: Evidence from China

Min Wang, Jie He and Peng Xu

Emerging Markets Finance and Trade, 2022, vol. 58, issue 4, 1206-1213

Abstract: This study uses the Shapley-Shubik Power Index to measure the ultimate control rights of companies listed on China’s main board market and empirically tests the effect of ultimate control rights on corporate fraud. We confirm that ultimate control rights have a significant restraining effect on corporate fraud. Specifically, the greater the ultimate control rights, the lower the probability of fraud and the fewer the number of frauds. Furthermore, we find that under different fraud subjects, fraud types, and fraud severity, this restraining effect still exists. In addition, we also find the ultimate control rights are negatively associated with fraud propensity, and are positively associated with fraud detection.

Date: 2022
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DOI: 10.1080/1540496X.2020.1845647

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