Digital finance and corporate financial fraud |
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| Institution: | 1. School of Finance, Nanjing University of Finance and Economics, Nanjing 210023, China;2. Institute of Industrial Economics, CASS, Beijing 100006, China;3. School of Business, Dalian University of Foreign Languages, Dalian 116044, China;4. School of Economic, Nanjing University of Finance and Economics, Nanjing 210023, China;1. Department of Accounting and Finance, Nottingham Business School, Nottingham Trent University, Nottingham, UK;2. Centre for Digital Finance, Department of Banking & Finance, Southampton Business School, University of Southampton, Southampton, UK;1. Audencia Business School, Research Center: Markets Technology and Society, 8 Route de la Joneliere, 44312 Cedex 3, Nantes, France;2. Heriot Watt University, Accounting, Economics and Finance SEEC, CFI, Edinburgh, Scotland EH14 4AS, UK;1. School of Public Administration, Nanjing university of Finance and Economics, China;2. Department of History of Science, Technology and Medicine, Peking University, China;1. School of Accounting, Capital University of Economics and Business, Beijing 100070, China;2. Business School, University of International Business and Economics, Beijing 100029, China;3. School of Economics and Management, Tsinghua University, Beijing 100190, China |
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| Abstract: | Corporate financial fraud harms the interests of investors and affects the healthy development of the capital market. Understanding corporate financial fraud has important academic value and practical significance. Digital finance been rapidly developing over the past few years and scholars are investigating strategies for using digital finance as a tool to curb corporate financial fraud. This paper empirically examines the direct effect, intrinsic mechanism, and heterogeneous effect of digital finance on corporate financial fraud based on panel data of A-share listed corporations in China from 2011 to 2020. Results show that digital finance significantly inhibits corporate financial fraud. The breadth of coverage and depth of usage within digital finance show inhibitory effects on corporate financial fraud. This suggests that a combination of coverage and depth is needed to improve the success of digital finance on corporate financial fraud. The internal mechanisms suggest that digital finance inhibits corporate financial fraud by alleviating financing constraints, reducing corporate leverage, and decreasing agency costs. The heterogeneity analysis shows digital finance has a greater inhibitory effect for large-scale corporates, state-owned corporates, and corporates in areas with low degree of marketization. Our findings can provide reference for financial institutions, investors, analysts, and regulators to improve the quality of decision-making. |
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