Do foreign investors deter corporate fraud? Evidence from China
Author ORCID Identifier
Wenlian Gao: https://orcid.org/0000-0003-0795-9890
Publication Title
Quarterly Review of Economics and Finance
ISSN
10629769
Document Type
Article
Abstract
This paper investigates the effect of foreign investment on corporate fraud in China. Using a sample of 2,838 firms over the period of 2004–2016, we find that foreign investment helps reduce the risk of corporate fraud. Specifically, foreign investment decreases the likelihood of committing fraud, the frequency of fraud, and its severity. Further evidence suggests that the effect is largely driven by foreign block investment and investment from countries with strong investor protections. Also, the effect of the phenomenon is more pronounced in state-owned enterprises than in non-state-owned enterprises. Our findings suggest that foreign investors play an active monitoring role in emerging markets.
First Page
92
Last Page
111
Publication Date
5-1-2022
DOI
10.1016/j.qref.2022.01.002
Keywords
Corporate fraud, Foreign investment, Investor protection
Recommended Citation
Quanxi Liang, Wenlian Gao, Hongji Xie, Do foreign investors deter corporate fraud? Evidence from China, The Quarterly Review of Economics and Finance, Volume 84, 2022, Pages 92-111, ISSN 1062-9769, https://doi.org/10.1016/j.qref.2022.01.002.
Original Citation
Quanxi Liang, Wenlian Gao, Hongji Xie, Do foreign investors deter corporate fraud? Evidence from China, The Quarterly Review of Economics and Finance, Volume 84, 2022, Pages 92-111, ISSN 1062-9769, https://doi.org/10.1016/j.qref.2022.01.002.
Department
Department of Finance
