Can Reform of Information Disclosure by an Exchange Restrain Corporate Fraud? Evidence from China. (22nd March 2022)

• Record Type: Journal Article
• Authors: Wang, Meng; Zhao, Wanlong; Zhang, Wei
• Is Part Of: Asia-Pacific journal of financial studies. Volume 51:Number 2(2022)
• Page Start: 223
• Page End: 255
• Publication Date: 2022-03-22
• Subjects: Corporate fraud -- Information disclosure system reform -- Corporate governance -- Differences‐in‐differences model; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12364
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: This study examines the impact of information disclosure system reform (IDSR) on corporate fraud. IDSR includes the internet‐based communication platforms and the introduction of assessment methods for information disclosure. The study finds that reform in the Shenzhen Stock Exchange (SZSE) reduces the probability, frequency, and severity of corporate fraud. In contrast, the reform in the Shanghai Stock Exchange (SSE) has no such effect. The negative association between the SZSE reform and corporate fraud is more evident for firms with weak internal controls and modified audit opinions. This study suggests disclosing companies' ranking in information disclosure assessments to the public to improve governance.