Affiliation:
1. Beijing Normal University Beijing China
2. East China University of Science and Technology Shanghai China
3. Central University of Finance and Economics Beijing China
Abstract
AbstractThrough using 17,995 firm‐year observations of all the Chinese A‐share listed firms from 2008 to 2016 as a sample, we document that firms with vertical interlock have a lower likelihood of committing corporate fraud. We further test the underlying mechanisms, and we find that the effect of vertical interlock on the occurrence of corporate fraud is more pronounced when firms operate in a region with poor legal protection; with the legal environment being enhanced in China, the effect of vertical interlock has become less significant; and the effect of vertical interlock is also more pronounced when firms exhibit poor information environment at the firm level. Our results in this paper imply that the role of large shareholders and legal protection are substitutes in an emerging economy, and even with rapid economic and legal development in China, large shareholders keep playing a positive role in controlling fraudulent behaviours in Chinese listed firms.
Funder
National Natural Science Foundation of China
Science and Technology Innovation Plan Of Shanghai Science and Technology Commission
Subject
Economics, Econometrics and Finance (miscellaneous),Finance,Accounting
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