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We formulate theory on the effect of board of director gender diversity on the broad spectrum of securities fraud and generate three main insights. First, based on ethicality, risk aversion, and diversity, we hypothesize that gender diversity on boards can operate as a significant moderator for the frequency of fraud. Second, we hypothesize that the stock market response to fraud from a more gender-diverse board is significantly less pronounced. Third, we hypothesize that women are more effective in maledominated industries in reducing both the frequency and severity of fraud. Our first-ever empirical tests, based on data from a large sample of Chinese firms that committed securities fraud, are largely consistent with each of these hypotheses. ABSTRACTWe formulate theory on the effect of board of director gender diversity on the broad spectrum of securities fraud and generate three main insights. First, based on ethicality, risk aversion, and diversity, we hypothesize that gender diversity on boards can operate as a significant moderator for the frequency of fraud. Second, we hypothesize that the stock market response to fraud from a more gender-diverse board is significantly less pronounced. Third, we hypothesize that women are more effective in male-dominated industries in reducing both the frequency and severity of fraud.Our first-ever empirical tests, based on data from a large sample of Chinese firms that committed securities fraud, are largely consistent with each of these hypotheses.

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Using brokerage account data from China, we study investment decision making in an emerging market. We find that Chinese investors make poor trading decisions: the stocks they purchase underperform those they sell. We also find that Chinese investors suffer from three behavioral biases: (i) they tend to sell stocks that have appreciated in price, but not those that have depreciated in price, consistent with a disposition effect, acknowledging gains but not losses; (ii) they seem overconfident; and (iii) they appear to believe that past returns are indicative of future returns (a representativeness bias). In comparisons to prior findings, Chinese investors seem more overconfident than U.S. investors (i.e., the Chinese hold fewer stocks, yet trade very often) and their disposition effect appears stronger. Finally, we categorize Chinese investors based on proxy measures of experience and find that ''experienced'' investors are not always less prone to behavioral biases than are ''inexperienced'' ones. key words disposition effect; investor behavior; overconfidence; representativeness biasThis study considers the extent to which Chinese investors make poor trading decisions and exhibit three particular behavioral biases: (a) the disposition effect, (b) overconfidence, and (c) the representativeness bias. These cognitive errors are forms of heuristic simplification, which stem from the brain's tendency to make mental shortcuts rather than engaging in longer analytical processing. The tendency for people to suffer from these biases is well-established in the psychology and behavioral science literature (e.g. Disposition effectConsider the situation in which an investor wishes to sell a stock. The investor can sell a stock that has increased in price or one that has decreased in price. People avoid actions that create regret and seek actions