Corporate Social Responsibility and Financial Fraud: Evidence from China

2019. Accounting and Finance, Volume59, Issue5, Pages 3133-3169

37 Pages Posted: 29 Oct 2019 Last revised: 1 Aug 2022

See all articles by Lin Liao

Lin Liao

Nanjing Audit Univeristy

Guanting Chen

Tsinghua University - School of Economics & Management

Dengjin Zheng

Central University of Finance and Economics

Date Written: December 1, 2019

Abstract

This paper investigates the impact of corporate social responsibility (CSR) on corporate financial fraud in China. We find that CSR scores are negatively associated with fraudulent financial activities, suggesting that CSR firms are less likely to engage in financial fraud. The results also indicate that the negative relation is more significant for CSR performance than CSR disclosure. Additionally, we demonstrate that the negative effect of CSR is more pronounced for firms with voluntary CSR practices, continuous CSR engagements, financial pressure, and internal control weaknesses. Overall, we find that CSR is an ethical behavior that reduces financial misconduct.

Keywords: CSR, Financial Fraud

JEL Classification: K42, M14

Suggested Citation

Liao, Lin and Chen, Guanting and Zheng, Dengjin, Corporate Social Responsibility and Financial Fraud: Evidence from China (December 1, 2019). 2019. Accounting and Finance, Volume59, Issue5, Pages 3133-3169, Available at SSRN: https://ssrn.com/abstract=3472661 or http://dx.doi.org/10.2139/ssrn.3472661

Lin Liao (Contact Author)

Nanjing Audit Univeristy ( email )

86 Yushan W Rd
Nanjing, Jiangsu 210017
China

Guanting Chen

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Dengjin Zheng

Central University of Finance and Economics ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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