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  1. Institutional Investors, Political Connections, and the Incidence of Regulatory Enforcement Against Corporate Fraud.Wenfeng Wu, Sofia A. Johan & Oliver M. Rui - 2016 - Journal of Business Ethics 134 (4):709-726.
    We investigate two under-explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud, namely institutional investors and political connections. The role of institutional investors in the effective monitoring of a firm’s management is well established in the literature. We further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud. The importance of political connections for enterprises, whether in a developed market (...)
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  • Mutual Fund Activism and Market Regulation During the Pre-IFRS Period: The Case of Earnings Informativeness in China From an Ethical Perspective.Shujun Ding, Chunxin Jia & Zhenyu Wu - 2016 - Journal of Business Ethics 138 (4):765-785.
    This paper investigates the emerging effect of mutual fund involvement on the agency problem between majority and minority shareholders during the pre-IFRS period in China indicated by earnings informativeness from an ethical perspective. We find that the presence of mutual fund hampers earnings informativeness implying that mutual funds in general, at their early stage in China, are not yet capable of serving as an effective monitor. This finding is in sharp contrast to the role of institutional investors in mature markets (...)
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  • Executive Compensation and Corporate Fraud in China.Martin J. Conyon & Lerong He - 2016 - Journal of Business Ethics 134 (4):669-691.
    This study investigates the relation between CEO compensation and corporate fraud in China. We document a significantly negative correlation between CEO compensation and corporate fraud using data on publicly traded firms between 2005 and 2010. Our findings are consistent with the hypothesis that firms penalize CEOs for fraud by lowering their pay. We also find that CEO compensation is lower in firms that commit more severe frauds. Panel data fixed effects and propensity score methods are used to demonstrate these effects. (...)
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  • CEO Accountability for Corporate Fraud: Evidence From the Split Share Structure Reform in China.Jiandong Chen, Douglas Cumming, Wenxuan Hou & Edward Lee - 2016 - Journal of Business Ethics 138 (4):787-806.
    We use institutional-related theories and a unique natural experiment that enables an exogenous test of the influence of controlling shareholders on managerial accountability to corporate fraud. In China, prior to the Split Share Structure Reform, state shareholders held restricted shares that could not be traded. This restriction mitigated state-owned enterprise controlling shareholders’ incentives to monitor managers. The data examined show the SSSR strengthens incentives of state-owned enterprise controlling shareholders to replace fraudulent management. Our findings support the view that economic incentives (...)
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  • What Drives Managerial Perks? An Empirical Test of Competing Theoretical Perspectives.Hua Zhang, Yuanyang Song & Yuan Ding - 2015 - Journal of Business Ethics 132 (2):259-275.
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  • Equity Incentives and Corporate Fraud in China.Lars Helge Hass, Monika Tarsalewska & Feng Zhan - 2016 - Journal of Business Ethics 138 (4):723-742.
    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 (...)
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  • Regulatory Sanctions on Independent Directors and Their Consequences to the Director Labor Market: Evidence From China.Michael Firth, Sonia Wong, Qingquan Xin & Ho Yin Yick - 2016 - Journal of Business Ethics 134 (4):693-708.
    We investigate the regulatory sanctions imposed on independent directors for their firms’ financial frauds in China. These regulatory sanctions are prima-facie evidence of significant lapses in business ethics. During the period 2003–2010, 302-person-time independent directors were penalized by the regulator, and the two stock exchanges. We find that the independent directors with accounting experiences are more likely to be penalized by the CSRC, though they do not suffer more severe penalties than do the other sanctioned independent directors. We also find (...)
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  • Is Corporate Governance in China Related to Performance Persistence?Lars Helge Haß, Sofia Johan & Denis Schweizer - 2016 - Journal of Business Ethics 134 (4):575-592.
    This paper examines the relationship between performance persistence and corporate governance. We document systematic differences in performance persistence across listed companies in China during 2001–2011, and empirically demonstrate that firms with better corporate governance show higher performance persistence. The results are robust over both the short and long terms. We also find that performance persistence is an important factor in refinancing, and it can lower companies’ costs of borrowing. Overall, our findings offer important implications for business ethics, as we demonstrate (...)
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  • The Effectiveness of Public Enforcement: Evidence From the Resolution of Tunneling in China.Lars Helge Haß, Sofia Johan & Maximilian André Müller - 2016 - Journal of Business Ethics 134 (4):649-668.
    This paper examines the effectiveness of public enforcement by studying the effects of regulatory intervention to curb tunneling through intercorporate loans in China. Specifically, we explore whether public enforcement efforts in 2006 resulted in less tunneling, and ultimately in increased performance for tunneling firms. We show that tunneling is among the dominant factors increasing the likelihood of becoming blacklisted. We also find that firms’ tunneling mechanisms decreased significantly after the regulatory shock, and that their performance increased significantly compared to non-tunneling (...)
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