State Ownership and Securities Fraud: A Political Governance Perspective

20 Pages Posted: 19 May 2020

See all articles by Wei Shi

Wei Shi

University of Miami; University of Miami - Department of Management

Ruth Aguilera

Northeastern University

Kai Wang

Capital University of Economics and Business

Date Written: March 2020

Abstract

Research question/issue. This study attempts to shed new light on how the state as a controlling shareholder can affect the interests of minority shareholders by investigating the role of state ownership in deterring securities fraud commission. Research findings/insights. Using archival data from a large sample of Chinese publicly traded firms, we uncover that state ownership is negatively associated with the likelihood of securities fraud commission. Further, CEO political background reinforces this negative relationship. We also uncover that firms with high state ownership are more likely to dismiss CEOs than those with low or no state ownership upon securities fraud detection. Theoretical/academic implications. Departing from agency theory‐centric research on state ownership and corporate governance, this study introduces a political governance perspective to unpack the role of state ownership in corporate governance. Political governance refers to organizational control mechanisms deployed by political actors to achieve their objectives. Practitioner/policy implications. Studying how political governance systems influence managerial behaviors is critical to gaining a complete insight into the implications of state ownership on corporate governance.

Keywords: Corporate governance, CEO dismissal, ownership, securities fraud, state ownership

Suggested Citation

Shi, Wei and Shi, Wei and Aguilera, Ruth and Wang, Kai, State Ownership and Securities Fraud: A Political Governance Perspective (March 2020). Corporate Governance: An International Review, Vol. 28, Issue 2, pp. 157-176, 2020, Available at SSRN: https://ssrn.com/abstract=3594684 or http://dx.doi.org/10.1111/corg.12313

Wei Shi

University of Miami ( email )

FL FL
United States

University of Miami - Department of Management ( email )

United States

Ruth Aguilera

Northeastern University

Kai Wang (Contact Author)

Capital University of Economics and Business ( email )

Beijing
China

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