IDEAS home Printed from https://ideas.repec.org/a/eee/quaeco/v97y2024ics1062976924000954.html
   My bibliography  Save this article

Overconfidence, short selling, and corporate fraud: Evidence from China

Author

Listed:
  • Cao, Guohua
  • Geng, Wenjun
  • Zhang, Jing
  • Yuan, Yongqi

Abstract

Using data on Chinese A-share listed firms from 2010 to 2020, this study employs a partial observable bivariate probit model and introduces fraud triangle theory to explain the mechanisms of overconfidence, short selling, and corporate fraud. Our findings show that overconfidence offers rationalization to investors and corporations, reduces fraud detection, and increases corporate incentives to commit fraud. Short selling promotes information transparency, increases fraud detection, and reduces the opportunities to commit fraud. Moreover, it moderates the relationship between overconfidence and corporate fraud. In addition, overconfidence and short selling affect different types of fraud (operational, executive, and information disclosure fraud). Furthermore, our results show heterogeneity among the ownership types. This study provides a theoretical basis for corporate fraud governance in China’s stock market.

Suggested Citation

  • Cao, Guohua & Geng, Wenjun & Zhang, Jing & Yuan, Yongqi, 2024. "Overconfidence, short selling, and corporate fraud: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:quaeco:v:97:y:2024:i:c:s1062976924000954
    DOI: 10.1016/j.qref.2024.101889
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062976924000954
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.qref.2024.101889?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:97:y:2024:i:c:s1062976924000954. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620167 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.