Ownership structure, corporate governance, and fraud: Evidence from China

Chen, Gongmeng; Firth, Michael; Gao, Daniel N.; Rui, Oliver M.

doi:10.1016/j.jcorpfin.2005.09.002

Cited by 820 publications

(655 citation statements)

References 45 publications

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“…Several studies measure expropriation by intercorporate loans, through which controlling shareholders siphoned tens of billions RMB from about one third of the listed firms during 1996-2006 (Jiang et al, 2010), or dividend payouts that reduce free cash flow for the private consumption by managers and controlling shareholders (Jensen, 1986 (Huang, Shen, & Sun, 2011;Jiang et al, 2010). When expropriation is measured by financial fraud or earnings management, most studies find ownership concentration to be an insignificant factor (Chen, Firth, Gao, & Rui, 2006;Cheng, Aerts, & Jorissen, 2010;Ding, Jia, Li, & Wu, 2010;Hsieh & Wu, 2012;Jia, Ding, Li, & Wu, 2009). However, there is evidence suggesting that a high level of ownership concentration reduces the likelihood of a firm to provide misleading or fraudulent financial information to minority shareholders (Ding, Zhang, & Zhang, 2007;Hou & Moore, 2010;Liu & Lu, 2007).…”

Section: Internal Mechanism: Ownership Structurementioning

confidence: 99%

“…Similarly, most studies find board size or meeting frequency to be an insignificant factor in executive compensation Conyon & He, 2012), executive turnover (Lau et al, 2007;Shen & Lin, 2009), financial fraud and expropriation (Chen et al, 2006;Ding et al, 2010;Firth et al, 2011;Hou & Moore, 2010;Jia et al, 2009;Shan, 2013), strategic decisions (Firth, Lin, & Zou, 2010;Li, Fetscherin, Alon, Lattemann, & Yeh, 2010), and firm performance (Buck, Liu, & Skovoroda, 2008;Gang, 2007;Hu et al, 2010;Singh & Gaur, 2009;. Among the few studies that find significant results, the findings are mixed.…”

Section: Internal Mechanism: Boards Of Directorsmentioning

confidence: 99%

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Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

2015

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The ownership structure of Chinese firms has experienced significant changes over the last three decades, including the development of a fast growing stock market through which a large number of domestic firms have become publicly traded corporations. These changes have drawn increasing attention from researchers of corporate governance. In this article, we review the empirical research on corporate governance in China, with a focus on the internal and external governance mechanisms that have been investigated and the findings about the effectiveness of these mechanisms. On the basis of our review of 132 studies, we summarize the major findings and discuss the limitation of agency theory in understanding the governance issue in Chinese firms. We offer several ideas (e.g., the importance of the social context, new conceptualization of governance, different outcomes of governance, and data/method issues) for a new agenda to guide future research in the corporate governance of firms operating in the Chinese and other emerging economy contexts.

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Section: Internal Mechanism: Ownership Structurementioning

confidence: 99%

Section: Internal Mechanism: Boards Of Directorsmentioning

confidence: 99%

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

2015

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“…They show enforcement actions by the CSRC result in negative stock returns, more frequent auditor changes and more frequent CEO dismissal. Chen, Firth, Gao and Rui (2006) report a marked increase in regulatory enforcement cases by the CSRC, rising from a total of only 18 in 1999 to a total of 69 in 2001. shareholders in a very direct way. The following sections examine the effects of the introduction of the new regulations on the value of Tradable-A shares in the Chinese share markets.…”

Section: Regulations To Improve Minority Shareholder Protectionmentioning

confidence: 99%

Political Connections and Minority-Shareholder Protection: Evidence from Securities-Market Regulation in China

Berkman¹,

Cole²,

Fu³

2010

J. Financ. Quant. Anal.

260

102

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Abstract:We examine the wealth effects of three regulatory changes designed to improve minority-shareholder protection in the Chinese stock markets. Using the value of a firm's related-party transactions as an inverse proxy for the quality of corporate governance, we find that firms with weaker governance experienced significantly larger abnormal returns around announcements of the new regulations than did firms with stronger governance. This evidence indicates that securities-market regulation can be effective in protecting minority shareholders from expropriation in a country with weak judicial enforcement. We also find that firms with strong ties to the government did not benefit from the new regulations, suggesting that minority shareholders did not expect regulators to enforce the new rules on firms where block holders have strong political connections.JEL classifications: G32, G34, G38

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“…This contradicts with a study done in china which found that ownership structure is insignificant in reducing fraud (Chen & Firth, 2006). However, the results found about corporate social responsibility supports the study that was conducted by (Legg, 2014) stating that corporate social responsibility increases consciousness among stakeholders and thus decreases fraud.…”

Section: Correlation Matrixcontrasting

confidence: 79%

“…Likewise, ownership structure has an impact on diminishing fraud. However, a study conducted in China shows that ownership structure is insignificant in achieving less fraudulent financial reporting in the corporation (Chen & Firth, 2006 suggested that any individual who will have knowledge about a fraudulent action happening will be held responsible for such actions and he/she will be considered either an immoral or public violation.…”

Section: Corporate Governance and Fraudmentioning

confidence: 99%

Effects of corporate governance on fraud prevention. (c2016)

Chaoul¹

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To my caring parents, sister, boss, and beloving friends. This thesis wouldn't be done without the non-ending care and understanding. V ACKNOWLEDGMENTMany people have been supportive while conducting this research thesis. Special thanks for Dr. Abdul Nasser El-Kassar who is my advisor and Dr. Walid Elgammal and Dr. Mahmoud Araissi who are the committee members. My thesis wouldn't be finalized without their help and support throughout the work process. Each in his way has helped me in data collection process, in data analysis and reading my revisions.Finally, thanks to my Mom, Dad and sister who tolerated me throughout the work process by caring and helping me. VI Effects of Corporate Governance on FraudPrevention: The Case of Lebanon Lea F. Chaoul AbstractFraudulent financial reporting and dishonesty in financial statements decrease credibility in audited financial reports. Reducing fraudulent activities can be achieved by implementing compliance mechanisms such as good corporate governance practices. Recent studies concluded that corporate governance structures should be improved in developing countries, particularly in Lebanon where corporate governance is weak in terms of application. This study aims to determine fraud prevention impacted by corporate governance dimensions, transparency of financial data and ownership structures, efficiency of the board of directors, and proactive corporate social responsibility measures and audit committee initiatives .This survey-based study uses data collected from employees working in different Lebanese corporations and who are familiar with corporate governance structures and financial performances the companies. Data analysis shows that the effectiveness and independence of the board of directors followed by the audit committee effectiveness, and the transparency of financial data have the highest impact on limiting fraudulent activities.

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Ownership structure, corporate governance, and fraud: Evidence from China

Cited by 820 publications

References 45 publications

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

Political Connections and Minority-Shareholder Protection: Evidence from Securities-Market Regulation in China

Effects of corporate governance on fraud prevention. (c2016)

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