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Corporate financialization, internal control and financial fraud

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  • Tian, Junmin
  • Sun, Hui

Abstract

The article explores the moderating role of internal control in the impact of financialization on financial fraud. The study, based on non-financial listed companies, shows that as non-financial companies become more financialized, they are significantly more likely to engage in financial fraud. After classifying the assets of companies, the article finds that the facilitative effect of financialization on financial fraud mainly stems from medium and small enterprises. Further research shows that internal control plays a negative role in financial fraud promoted by corporate financialization.

Suggested Citation

  • Tian, Junmin & Sun, Hui, 2023. "Corporate financialization, internal control and financial fraud," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s154461232300418x
    DOI: 10.1016/j.frl.2023.104046
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    References listed on IDEAS

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    1. Dongmin Kong & Ni Qin & Wei Yang & Jian Zhang, 2022. "Employee Cash Profit-Sharing and Earnings Management," European Accounting Review, Taylor & Francis Journals, vol. 31(3), pages 761-785, May.
    2. Zhang, Jian & Wang, Jialong & Kong, Dongmin, 2020. "Employee treatment and corporate fraud," Economic Modelling, Elsevier, vol. 85(C), pages 325-334.
    3. Dongmin Kong & Junyi Xiang & Jian Zhang & Yiyang Lu, 2019. "Politically connected independent directors and corporate fraud in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1347-1383, March.
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    Cited by:

    1. Wang, Ying & Tai, Peisen & Pang, Mengmiao, 2024. "Corporate social responsibility and corporate fraud: The mediating effect of analyst attention," Finance Research Letters, Elsevier, vol. 64(C).
    2. Liu, Li & He, Jun, 2023. "Does financialization affect firm’ R&D investment? Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    3. Shen, Zhou & Sun, Sisi & Zhu, Yingtao, 2024. "Shadow banking, credit term structure, and financialization of manufacturing firms," Finance Research Letters, Elsevier, vol. 60(C).
    4. Chen, Yan & Sun, Ruiqi, 2023. "Corporate financialization and the long-term use of short-term debt: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).

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