Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China

How corporate governance mechanisms function in transition economies is a key topic for corporate governance researchers and policy makers. We propose that alternative governance mechanisms are in place to mitigate corporate fraudulent behaviors in the fluid state of transition economies where the e...

Full description

Saved in:
Bibliographic Details
Main Authors: YIU, Daphne W., WAN, William P., XU, Yuehua
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2019
Subjects:
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7342
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.lkcsb_research-8341
record_format dspace
spelling sg-smu-ink.lkcsb_research-83412023-11-10T01:48:03Z Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China YIU, Daphne W. WAN, William P. XU, Yuehua How corporate governance mechanisms function in transition economies is a key topic for corporate governance researchers and policy makers. We propose that alternative governance mechanisms are in place to mitigate corporate fraudulent behaviors in the fluid state of transition economies where the establishment and enforcement of corporate governance legislation are presently insufficient. Drawing on the twin set of institutional logics-the institutional embeddedness logic and the institutional substitution logic-we posit that three salient types of prevailing alternative governance mechanisms (relational, administrative, and foreign governance) play important roles in transition economies because they are complementary to the institutional conditions at the time of the transition process. Conducting a bivariate probit analysis of a matched sample of corporate financial fraud cases in China, we find that strategic alliances, business group affiliation, nontradable state shares, local government ownership, use of foreign auditors, and foreign listing can deter corporate financial fraud, while foreign listing is also effective in detecting fraud. We also find that the deterrence effects of strategic alliances and business group affiliation become weaker as law development improves, while foreign listing and legal governance are completely substitutive. Our study provides a contextualized view of corporate governance that connects its effectiveness with institutionalization and the institutional state of a country. Our study also enriches our understanding of some unfamiliar forms of governance mechanisms that are in place and complementary to a country's institutional conditions. 2019-09-01T07:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/7342 info:doi/10.1177/0149206318764296 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Corporate governance; Corporate fraud; Institutional embeddedness; Institutional substitution; China Corporate Finance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Corporate governance; Corporate fraud; Institutional embeddedness; Institutional substitution; China
Corporate Finance
Finance and Financial Management
spellingShingle Corporate governance; Corporate fraud; Institutional embeddedness; Institutional substitution; China
Corporate Finance
Finance and Financial Management
YIU, Daphne W.
WAN, William P.
XU, Yuehua
Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China
description How corporate governance mechanisms function in transition economies is a key topic for corporate governance researchers and policy makers. We propose that alternative governance mechanisms are in place to mitigate corporate fraudulent behaviors in the fluid state of transition economies where the establishment and enforcement of corporate governance legislation are presently insufficient. Drawing on the twin set of institutional logics-the institutional embeddedness logic and the institutional substitution logic-we posit that three salient types of prevailing alternative governance mechanisms (relational, administrative, and foreign governance) play important roles in transition economies because they are complementary to the institutional conditions at the time of the transition process. Conducting a bivariate probit analysis of a matched sample of corporate financial fraud cases in China, we find that strategic alliances, business group affiliation, nontradable state shares, local government ownership, use of foreign auditors, and foreign listing can deter corporate financial fraud, while foreign listing is also effective in detecting fraud. We also find that the deterrence effects of strategic alliances and business group affiliation become weaker as law development improves, while foreign listing and legal governance are completely substitutive. Our study provides a contextualized view of corporate governance that connects its effectiveness with institutionalization and the institutional state of a country. Our study also enriches our understanding of some unfamiliar forms of governance mechanisms that are in place and complementary to a country's institutional conditions.
format text
author YIU, Daphne W.
WAN, William P.
XU, Yuehua
author_facet YIU, Daphne W.
WAN, William P.
XU, Yuehua
author_sort YIU, Daphne W.
title Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China
title_short Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China
title_full Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China
title_fullStr Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China
title_full_unstemmed Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China
title_sort alternative governance and corporate financial fraud in transition economies: evidence from china
publisher Institutional Knowledge at Singapore Management University
publishDate 2019
url https://ink.library.smu.edu.sg/lkcsb_research/7342
_version_ 1783955655352123392