Covering or monitoring? Independent director connectedness and corporate fraud in China
This paper examines how independent directors’ social capital, as measured by their social network, affects corporate fraud. We find that firms with well-connected independent directors are less likely to commit fraud, supporting our monitoring effect hypothesis. This result is robust to a battery o...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2022-12-01
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| Series: | China Journal of Accounting Research |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S1755309122000533 |
| _version_ | 1797987229813964800 |
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| author | Jieli Xing Yongjie Zhang Xiong Xiong Guangzhong Li |
| author_facet | Jieli Xing Yongjie Zhang Xiong Xiong Guangzhong Li |
| author_sort | Jieli Xing |
| collection | DOAJ |
| description | This paper examines how independent directors’ social capital, as measured by their social network, affects corporate fraud. We find that firms with well-connected independent directors are less likely to commit fraud, supporting our monitoring effect hypothesis. This result is robust to a battery of tests. Further analyses show that the effect is stronger for firms with a relatively poor legal environment, for firms whose independent directors face strong reputation incentives and when independent directors are audit committee members. Moreover, we explore a potential economic mechanism of the effect and observe that well-connected independent directors are associated with less absenteeism and more dissension. Overall, our findings suggest that independent directors’ social capital plays an important role in corporate governance. |
| first_indexed | 2024-04-11T07:44:30Z |
| format | Article |
| id | doaj.art-ea324f184d0a42c3930bc43830758bf2 |
| institution | Directory Open Access Journal |
| issn | 1755-3091 |
| language | English |
| last_indexed | 2024-04-11T07:44:30Z |
| publishDate | 2022-12-01 |
| publisher | Elsevier |
| record_format | Article |
| series | China Journal of Accounting Research |
| spelling | doaj.art-ea324f184d0a42c3930bc43830758bf22022-12-22T04:36:21ZengElsevierChina Journal of Accounting Research1755-30912022-12-01154100273Covering or monitoring? Independent director connectedness and corporate fraud in ChinaJieli Xing0Yongjie Zhang1Xiong Xiong2Guangzhong Li3Economics and Management College, Civil Aviation University of China, Tianjin, PR ChinaCollege of Management and Economics, Tianjin University, Tianjin, PR ChinaCollege of Management and Economics, Tianjin University, Tianjin, PR ChinaBusiness School, Sun Yat-Sen University, Shenzhen, PR China; Corresponding author.This paper examines how independent directors’ social capital, as measured by their social network, affects corporate fraud. We find that firms with well-connected independent directors are less likely to commit fraud, supporting our monitoring effect hypothesis. This result is robust to a battery of tests. Further analyses show that the effect is stronger for firms with a relatively poor legal environment, for firms whose independent directors face strong reputation incentives and when independent directors are audit committee members. Moreover, we explore a potential economic mechanism of the effect and observe that well-connected independent directors are associated with less absenteeism and more dissension. Overall, our findings suggest that independent directors’ social capital plays an important role in corporate governance.http://www.sciencedirect.com/science/article/pii/S1755309122000533G34M41Z13 |
| spellingShingle | Jieli Xing Yongjie Zhang Xiong Xiong Guangzhong Li Covering or monitoring? Independent director connectedness and corporate fraud in China China Journal of Accounting Research G34 M41 Z13 |
| title | Covering or monitoring? Independent director connectedness and corporate fraud in China |
| title_full | Covering or monitoring? Independent director connectedness and corporate fraud in China |
| title_fullStr | Covering or monitoring? Independent director connectedness and corporate fraud in China |
| title_full_unstemmed | Covering or monitoring? Independent director connectedness and corporate fraud in China |
| title_short | Covering or monitoring? Independent director connectedness and corporate fraud in China |
| title_sort | covering or monitoring independent director connectedness and corporate fraud in china |
| topic | G34 M41 Z13 |
| url | http://www.sciencedirect.com/science/article/pii/S1755309122000533 |
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