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  1. Social Trust and Corporate Misconduct: Evidence From China.Wang Dong, Hongling Han, Yun Ke & Kam C. Chan - 2018 - Journal of Business Ethics 151 (2):539-562.
    We study whether greater social trust is associated with a lower incidence of corporate misconduct. Both social norm and network theory suggest that social trust can affect managerial behavior and reduce the likelihood of misconduct behavior. Consistent with this prediction, we find that social trust is negatively associated with corporate misconduct behavior. Moreover, we show that, when media coverage is higher, the negative relation between social trust and corporate misconduct behavior is more pronounced. Further analyses suggest that social trust can (...)
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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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  • Reactivity and Passivity After Enforcement Actions: Better Late Than Never. [REVIEW]Shujun Ding, Chunxin Jia, Yuanshun Li & Zhenyu Wu - 2010 - Journal of Business Ethics 95 (S2):337 - 359.
    We examine the dynamics between enforcement actions and the responses from both the board of directors and supervisory boards amid China's governance reform. Rather than examining determinants of fraudulent activities, we investigate, after enforcement actions are imposed, whether the board of directors and supervisory boards react differently, and whether their different reactions play a role in preventing future occurrences of frauds. We find that both boards react to enforcement actions, but only the responses from the board of directors help us (...)
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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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  • Reputational Implications for Partners After a Major Audit Failure: Evidence From China.Xianjie He, Jeffrey Pittman & Oliver Rui - 2016 - Journal of Business Ethics 138 (4):703-722.
    We analyze whether audit partners suffered damage to their professional reputations with the demise of Zhongtianqin, formerly the largest audit firm in China, after an audit failure enabled a major client, Yinguangxia, to fraudulently exaggerate its earnings in a high-profile scandal resembling the Andersen–Enron events in the US. This involves evaluating whether the reputational damage sustained by partners implicated in the scandal spreads to other partners in the same audit firm. We isolate whether impaired reputation impedes partners who were not (...)
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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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  • Does the External Monitoring Effect of Financial Analysts Deter Corporate Fraud in China?Jiandong Chen, Douglas Cumming, Wenxuan Hou & Edward Lee - 2016 - Journal of Business Ethics 134 (4):727-742.
    We examine whether analyst coverage influences corporate fraud in China. The fraud triangle specifies three main factors, i.e. opportunity, incentive, and rationalization. On the one hand, analysts may reduce the fraud opportunity factor through external monitoring aimed at discouraging managerial misconduct, which can moderate agency problems. On the other hand, analysts may increase the fraud incentive factor by pressurizing managers to achieve short-term performance targets, which can exacerbate agency problem. In either case, the potential influence of analysts on the fraud (...)
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  • Corporate Social Responsibility in China: A Corporate Governance Approach.ChungMing Lau, Yuan Lu & Qiang Liang - 2016 - Journal of Business Ethics 136 (1):73-87.
    This study examines the effects of corporate governance mechanisms on CSR performance in an emerging economy, China. Because of the need of gaining legitimacy in the new institutional context, Chinese firms have to adopt global CSR practices in order to remain competitive. Using the corporate governance framework, this study examines how board composition, ownership, and TMT composition influence corporate social performance. The propositions are tested using data gathered from 471 firms in China. By and large, empirical findings supported the hypothesized (...)
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  • Player and Referee Roles Held Jointly: The Effect of State Ownership on China’s Regulatory Enforcement Against Fraud.Wenxuan Hou & Geoff Moore - 2010 - Journal of Business Ethics 95 (S2):317-335.
    This article examines the impact of the prevailing state ownership in the Chinese stock market on corporate governance and the financial regulatory system, respectively, as the internal and external monitoring mechanisms to deter corporate fraud and protect investors. In line with the literature that state ownership exaggerates the agency problem, we find that the retained state ownership in privatised firms increases the incidence of regulatory enforcements against fraud. For the state-owned enterprises (SOEs), however, larger state ownership is associated with a (...)
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  • Family Ownership and Corporate Misconduct in U.S. Small Firms.Shujun Ding & Zhenyu Wu - 2014 - Journal of Business Ethics 123 (2):183-195.