CEO Accountability for Corporate Fraud: Evidence from the Split Share Structure Reform in China
44 Pages Posted: 10 Jul 2011 Last revised: 24 Nov 2014
Date Written: July 8, 2011
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.
Keywords: Corporate fraud, CEO turnover, State ownership, Split Share Structure Reform, China
JEL Classification: G32, J33
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