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Corporate social responsibility and financial fraud: evidence from China

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  • Lin Liao
  • Guanting Chen
  • Dengjin Zheng

Abstract

This paper investigates the impact of corporate social responsibility (CSR) on corporate financial fraud in China. We find that CSR scores are negatively associated with fraudulent financial activities, suggesting that CSR firms are less likely to engage in financial fraud. The results also indicate that the negative relation is more significant for CSR performance than CSR disclosure. Additionally, we demonstrate that the negative effect of CSR is more pronounced for firms with voluntary CSR practices, continuous CSR engagements, financial pressure and internal control weaknesses. Overall, we find that CSR is an ethical behaviour that reduces financial misconduct.

Suggested Citation

  • Lin Liao & Guanting Chen & Dengjin Zheng, 2019. "Corporate social responsibility and financial fraud: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(5), pages 3133-3169, December.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:5:p:3133-3169
    DOI: 10.1111/acfi.12572
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