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Confucianism and corporate fraud

Author

Listed:
  • Xudong Tang
  • Yan Gu
  • Ruoyu Weng
  • Kungcheng Ho

Abstract

Purpose - Confucianism underpins Chinese traditional culture and the values of the Chinese people. The purpose of this study is to examine the relationship between adherence to Confucianism and corporate irregularities. Design/methodology/approach - The authors use the historical numbers of Jinshi (Imperial Scholars) in the Ming and Qing dynasties within 200 km of a company's location to proxy for the influence of Confucianism on the company, presenting strong evidence that Confucianism significantly reduces corporate irregularities. Findings - The authors' findings are robust even when criticized with alternative definitions of Confucianism, sensitivity analysis and instrumental variable regression. The authors also discover that this effect is weaker in state-owned and foreign enterprises and weakened by the influence of Western culture. Originality/value - This paper brings a new traditional-cultural perspective to the understanding of corporate irregularities and contributes to the literature on culture and finance. This paper also helps the authors understand the “China Puzzle” that is China's rapid economic development under an imperfect legal system.

Suggested Citation

  • Xudong Tang & Yan Gu & Ruoyu Weng & Kungcheng Ho, 2021. "Confucianism and corporate fraud," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(6), pages 1425-1445, January.
    • Handle: RePEc:eme:ijoemp:ijoem-12-2019-1004
    DOI: 10.1108/IJOEM-12-2019-1004
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    Citations

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    Cited by:

    1. Deqiang Deng & Chenchen Ye & Fan Wu & Yijing Guo & Hao Li & Changsheng Wang, 2023. "Effect of organizational ethical self-interest climate on unethical accounting behaviour with two different motivations in China: the moderating effect of Confucian ShiZhong Thinking," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    2. Min Huang & Xiaobo Li & Jun Xia & Mengyao Li, 2024. "Does Confucianism Prompt Firms to Participate in Poverty Alleviation Campaigns?," Journal of Business Ethics, Springer, vol. 189(4), pages 743-762, February.
    3. Xixiong Xu & Maochuan Wang, 2024. "Confucianism and employee treatment: Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2649-2669, July.
    4. Kong, Xiaoran & Xu, Siping & Liu, Ming-Yu & Ho, Kung-Cheng, 2023. "Confucianism and D&O insurance demand of Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

    More about this item

    Keywords

    Confucianism; Corporate fraud; Culture; Jinshi; G32; G38;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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