Equity incentives and corporate fraud in China

Hass, Lars Helge and Tarsalewska, Monika and Zhan, Feng (2016) Equity incentives and corporate fraud in China. Journal of Business Ethics, 138 (4). pp. 723-742. ISSN 0167-4544 (https://doi.org/10.1007/s10551-015-2774-2)

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Abstract

This paper explores how managers' and supervisors' equity incentives impact the likelihood of committing corporate fraud in Chinese-listed firms. Previous research has shown that corporate fraud in China is a widespread phenomenon and has severe consequences for affected firms and executives. However, our understanding of the reasons that fraud is committed in a Chinese setting has been very limited thus far. This is an increasingly important topic, because corporate governance is rapidly changing in China, and it is unclear whether adopting the executive compensation practices of the West is appropriate for Chinese firms. We show that managers' equity incentives increase their propensity to commit corporate fraud. We also find that this effect is more pronounced for state-owned firms. However, we find a negative but not significant relationship between the equity incentives of the supervisory board and the incidence of fraud.

  • Item type:Article
    ID code:73259
    Dates:
    Date
    Event
    1 November 2016
    Published
    6 August 2015
    Published Online
    11 July 2015
    Accepted
    Notes:This is a post-peer-review, pre-copyedit version of an article published in Journal of Business Ethics. The final authenticated version is available online at: http://dx.doi.org/10.1007/s10551-015-2774-2
    Subjects:Social Sciences > Finance
    Department:Strathclyde Business School > Accounting and Finance
    Depositing user: Pure Administrator
    Date deposited:21 Jul 2020 13:27
    Last modified:17 Apr 2024 15:50
    URI:https://strathprints.strath.ac.uk/id/eprint/73259
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