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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Equity incentives and corporate fraud in China
AU - Hass, Lars Helge
AU - Tarsalewska, Monika
AU - Zhan, Feng
N1 - The final publication is available at Springer via http://dx.doi.org/10.1007/s10551-015-2774-2
PY - 2016/11
Y1 - 2016/11
N2 - 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.
AB - 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.
KW - Equity incentives
KW - Corporate fraud
KW - Corporate governance
KW - Ownership structure
KW - Chinese economy
U2 - 10.1007/s10551-015-2774-2
DO - 10.1007/s10551-015-2774-2
M3 - Journal article
VL - 138
SP - 723
EP - 742
JO - Journal of Business Ethics
JF - Journal of Business Ethics
SN - 0167-4544
IS - 4
ER -