Journal of Business Ethics 134 (4):669-691 (2016)

Abstract
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. Our results also indicate that corporate governance mechanisms influence the magnitude of punishment. We find that CEOs of privately controlled firms, firms that split the posts of CEO and chairman, and CEOs of firms located in developed regions suffer larger compensation penalties for committing financial fraud. Finally, we show that CEOs at firms that commit fraud are more likely to be replaced compared to those at non-fraud firms.
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DOI 10.1007/s10551-014-2390-6
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References found in this work BETA

Determinants of Earnings Management Ethics Among Accountants.Rafik Z. Elias - 2002 - Journal of Business Ethics 40 (1):33 - 45.
Ethics Failures in Corporate Financial Reporting.George J. Staubus - 2005 - Journal of Business Ethics 57 (1):5-15.
Executive Compensation and Corporate Fraud in China.Martin J. Conyon & Lerong He - 2016 - Journal of Business Ethics 134 (4):669-691.
Ethically Related Judgments by Observers of Earnings Management.Steven E. Kaplan - 2001 - Journal of Business Ethics 32 (4):285 - 298.

View all 12 references / Add more references

Citations of this work BETA

Executive Compensation and Corporate Fraud in China.Martin J. Conyon & Lerong He - 2016 - Journal of Business Ethics 134 (4):669-691.

View all 9 citations / Add more citations

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