CEO accountability for corporate fraud: Evidence from the Split Share Structure Reform in China

Jiandong Chen, Douglas Cumming, Wenxuan Hou, Edward Lee

Research output: Contribution to journalArticlepeer-review

Abstract

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 (SSSR), 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 are important to promote corporate governance and deter fraud.
Original languageEnglish
Pages (from-to)787-806
JournalJournal of Business Ethics
Volume138
Issue number4
Early online date25 Nov 2014
DOIs
Publication statusPublished - Nov 2016

Keywords

  • CEO turnover
  • corporate fraud
  • ownership
  • Split Share Structure Reform
  • China

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