IDEAS home Printed from https://ideas.repec.org/a/kap/asiapa/v40y2023i2d10.1007_s10490-022-09805-0.html
   My bibliography  Save this article

To cheat when continuously missing aspirations: Does CEO experience matter?

Author

Listed:
  • Xi Zhong

    (Guangdong University of Technology)

  • Liuyang Ren

    (Guangdong University of Foreign Studies)

  • Tiebo Song

    (South China University of Technology)

Abstract

Underperformance is seen as an important determinant of firms’ involvement in corporate fraud, but scholars have not reached a consensus on the nature of the relationship between underperformance and corporate fraud to date. In this study, we explore this topic from a new perspective. Specifically, based on performance feedback theory and fraud triangle theory, we explore the impact of the duration of underperformance, rather than the intensity of underperformance, on corporate fraud. Taking 2009–2018 listed firms in China as the research object and using the bivariate probit model for empirical testing, we find that the more a firm underperformed, the higher the likelihood the firm was involved in corporate fraud. In addition, we find that CEOs’ academic experience, overseas work experience and military experience weaken the above relationship by restraining CEO rationalization of corporate fraud.

Suggested Citation

  • Xi Zhong & Liuyang Ren & Tiebo Song, 2023. "To cheat when continuously missing aspirations: Does CEO experience matter?," Asia Pacific Journal of Management, Springer, vol. 40(2), pages 815-845, June.
    • Handle: RePEc:kap:asiapa:v:40:y:2023:i:2:d:10.1007_s10490-022-09805-0
    DOI: 10.1007/s10490-022-09805-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10490-022-09805-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10490-022-09805-0?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.

    References listed on IDEAS

    as
    1. Shen, Huayu & Lan, Fengyun & Xiong, Hao & Lv, Jun & Jian, Jianhui, 2020. "Does top management Team’s academic experience promote corporate innovation? Evidence from China," Economic Modelling, Elsevier, vol. 89(C), pages 464-475.
    2. Farhad Uddin Ahmed & Louis Brennan, 2019. "The impact of Founder’s human capital on firms’ extent of early internationalisation: Evidence from a least-developed country," Asia Pacific Journal of Management, Springer, vol. 36(3), pages 615-659, September.
    3. Christian Schumacher & Steffen Keck & Wenjie Tang, 2020. "Biased interpretation of performance feedback: The role of CEO overconfidence," Strategic Management Journal, Wiley Blackwell, vol. 41(6), pages 1139-1165, June.
    4. Jiandong Chen & Douglas Cumming & Wenxuan Hou & Edward Lee, 2016. "Does the External Monitoring Effect of Financial Analysts Deter Corporate Fraud in China?," Journal of Business Ethics, Springer, vol. 134(4), pages 727-742, April.
    5. Haß, Lars Helge & Müller, Maximilian A. & Vergauwe, Skrålan, 2015. "Tournament incentives and corporate fraud," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 251-267.
    6. Martin J. Conyon & Lerong He, 2016. "Executive Compensation and Corporate Fraud in China," Journal of Business Ethics, Springer, vol. 134(4), pages 669-691, April.
    7. Bao, Fenghua & Zhao, Yapu & Tian, Longwei & Li, Yuan, 2019. "From Financial Misdemeanants to Recidivists: The Perspective of Social Networks," Management and Organization Review, Cambridge University Press, vol. 15(4), pages 809-835, December.
    8. Morten Bennedsen & Francisco Pérez‐González & Daniel Wolfenzon, 2020. "Do CEOs Matter? Evidence from Hospitalization Events," Journal of Finance, American Finance Association, vol. 75(4), pages 1877-1911, August.
    9. John Joseph & Vibha Gaba, 2015. "The fog of feedback: Ambiguity and firm responses to multiple aspiration levels," Strategic Management Journal, Wiley Blackwell, vol. 36(13), pages 1960-1978, December.
    10. Pasi Kuusela & Thomas Keil & Markku Maula, 2017. "Driven by aspirations, but in what direction? Performance shortfalls, slack resources, and resource-consuming vs. resource-freeing organizational change," Strategic Management Journal, Wiley Blackwell, vol. 38(5), pages 1101-1120, May.
    11. Bill Francis & Iftekhar Hasan & Qiang Wu, 2015. "Professors in the Boardroom and Their Impact on Corporate Governance and Firm Performance," Financial Management, Financial Management Association International, vol. 44(3), pages 547-581, September.
    12. Patricia M. Dechow & Richard G. Sloan & Amy P. Sweeney, 1996. "Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC," Contemporary Accounting Research, John Wiley & Sons, vol. 13(1), pages 1-36, March.
    13. Vasant Raval, 2018. "A Disposition-Based Fraud Model: Theoretical Integration and Research Agenda," Journal of Business Ethics, Springer, vol. 150(3), pages 741-763, July.
    14. Sunder, Jayanthi & Sunder, Shyam V. & Zhang, Jingjing, 2017. "Pilot CEOs and corporate innovation," Journal of Financial Economics, Elsevier, vol. 123(1), pages 209-224.
    15. Wei Shi & Brian L. Connelly & Wm. Gerard Sanders, 2016. "Buying bad behavior: Tournament incentives and securities class action lawsuits," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1354-1378, July.
    16. Zhong, Xi & Ren, Liuyang & Song, Tiebo, 2021. "Different effects of internal and external tournament incentives on corporate financial misconduct: Evidence from China," Journal of Business Research, Elsevier, vol. 134(C), pages 329-341.
    17. Wenfeng Wu & Sofia A. Johan & Oliver M. Rui, 2016. "Institutional Investors, Political Connections, and the Incidence of Regulatory Enforcement Against Corporate Fraud," Journal of Business Ethics, Springer, vol. 134(4), pages 709-726, April.
    18. Varkey Titus Jr. & Owen Parker & Jeffrey Covin, 2020. "Organizational Aspirations and External Venturing: The Contingency of Entrepreneurial Orientation," Entrepreneurship Theory and Practice, , vol. 44(4), pages 645-670, July.
    19. Dauth, Tobias & Pronobis, Paul & Schmid, Stefan, 2017. "Exploring the link between internationalization of top management and accounting quality: The CFO’s international experience matters," International Business Review, Elsevier, vol. 26(1), pages 71-88.
    20. ChungMing Lau & Yuan Lu & Qiang Liang, 2016. "Corporate Social Responsibility in China: A Corporate Governance Approach," Journal of Business Ethics, Springer, vol. 136(1), pages 73-87, June.
    21. Jared Harris & Philip Bromiley, 2007. "Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation," Organization Science, INFORMS, vol. 18(3), pages 350-367, June.
    22. Tracy Yue Wang & Andrew Winton & Xiaoyun Yu, 2010. "Corporate Fraud and Business Conditions: Evidence from IPOs," Journal of Finance, American Finance Association, vol. 65(6), pages 2255-2292, December.
    23. Daomi Lin & Jiangyong Lu & Xiaohui Liu & Xiru Zhang, 2016. "International knowledge brokerage and returnees’ entrepreneurial decisions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(3), pages 295-318, April.
    24. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, May.
    25. Pamela Murphy & M. Dacin, 2011. "Psychological Pathways to Fraud: Understanding and Preventing Fraud in Organizations," Journal of Business Ethics, Springer, vol. 101(4), pages 601-618, July.
    26. Kelvin K. F. Law & Lillian F. Mills, 2017. "Military experience and corporate tax avoidance," Review of Accounting Studies, Springer, vol. 22(1), pages 141-184, March.
    27. Vikramaditya Khanna & E. Han Kim & Yao Lu, 2015. "CEO Connectedness and Corporate Fraud," Journal of Finance, American Finance Association, vol. 70(3), pages 1203-1252, June.
    28. Jin-hui Luo & Yuangao Xiang & Ruichao Zhu, 2017. "Military top executives and corporate philanthropy: Evidence from China," Asia Pacific Journal of Management, Springer, vol. 34(3), pages 725-755, September.
    29. Shon R. Hiatt & W. Chad Carlos & Wesley D. Sine, 2018. "Manu Militari : The Institutional Contingencies of Stakeholder Relationships on Entrepreneurial Performance," Organization Science, INFORMS, vol. 29(4), pages 633-652, August.
    30. Zhou, Fangzhao & Zhang, Zenan & Yang, Jun & Su, Yunpeng & An, Yunbi, 2018. "Delisting pressure, executive compensation, and corporate fraud: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 17-34.
    31. Lin-Hua Lu & Poh-Kam Wong, 2019. "Performance feedback, financial slack and the innovation behavior of firms," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1079-1109, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liuyang Ren & Xi Zhong & Liangyong Wan, 2022. "Missing Analyst Forecasts and Corporate Fraud: Evidence from China," Journal of Business Ethics, Springer, vol. 181(1), pages 171-194, November.
    2. Zhong, Xi & Ren, Liuyang & Song, Tiebo, 2021. "Different effects of internal and external tournament incentives on corporate financial misconduct: Evidence from China," Journal of Business Research, Elsevier, vol. 134(C), pages 329-341.
    3. Abdul Ghafoor & Rozaimah Zainudin & Nurul Shahnaz Mahdzan, 2019. "Factors Eliciting Corporate Fraud in Emerging Markets: Case of Firms Subject to Enforcement Actions in Malaysia," Journal of Business Ethics, Springer, vol. 160(2), pages 587-608, December.
    4. Monica Ramos Montesdeoca & Agustín J. Sánchez Medina & Felix Blázquez Santana, 2019. "Research Topics in Accounting Fraud in the 21st Century: A State of the Art," Sustainability, MDPI, vol. 11(6), pages 1-31, March.
    5. Liuyang Ren & Xi Zhong & Liangyong Wan, 2022. "Defending the shell: differential effects of delisting pressure on R&D intensity and bribery expenditure," Review of Managerial Science, Springer, vol. 16(5), pages 1437-1470, July.
    6. Zhou, Fangzhao & Zhang, Zenan & Yang, Jun & Su, Yunpeng & An, Yunbi, 2018. "Delisting pressure, executive compensation, and corporate fraud: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 17-34.
    7. Hou, Xiaohui & Wang, Tengyu & Ma, Caoyuan, 2021. "Economic policy uncertainty and corporate fraud," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 97-110.
    8. Wu, Fang & Cao, June & Zhang, Xiaosan, 2023. "Do non-executive employees matter in curbing corporate financial fraud?," Journal of Business Research, Elsevier, vol. 163(C).
    9. Xin Xu & Feng Xiong & Zhe An, 2023. "Using Machine Learning to Predict Corporate Fraud: Evidence Based on the GONE Framework," Journal of Business Ethics, Springer, vol. 186(1), pages 137-158, August.
    10. Xi Zhong & Liuyang Ren & Tiebo Song, 2022. "Beyond Market Strategies: How Multiple Decision-Maker Groups Jointly Influence Underperforming Firms’ Corporate Social (Ir)responsibility," Journal of Business Ethics, Springer, vol. 178(2), pages 481-499, June.
    11. Dan Amiram & Zahn Bozanic & James D. Cox & Quentin Dupont & Jonathan M. Karpoff & Richard Sloan, 2018. "Financial reporting fraud and other forms of misconduct: a multidisciplinary review of the literature," Review of Accounting Studies, Springer, vol. 23(2), pages 732-783, June.
    12. Chen, Yunyan & Wu, Shinong & Zhou, Yucheng & Huo, Di, 2023. "Gambling culture and corporate violations: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    13. Su, Fei & Feng, Xu & Tang, Songlian, 2021. "Do site visits mitigate corporate fraudulence? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 78(C).
    14. Liu, Yang & Zhang, Han & Zhang, Fukang, 2023. "CEO's poverty imprints and corporate financial fraud: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    15. Xiong, Jiacai & Ouyang, Caiyue & Tong, Jamie Yixing & Zhang, Feida Frank, 2021. "Fraud commitment in a smaller world: Evidence from a natural experiment," Journal of Corporate Finance, Elsevier, vol. 70(C).
    16. Cole, Rebel & Johan, Sofia & Schweizer, Denis, 2021. "Corporate failures: Declines, collapses, and scandals," Journal of Corporate Finance, Elsevier, vol. 67(C).
    17. Patrick Velte, 2023. "The link between corporate governance and corporate financial misconduct. A review of archival studies and implications for future research," Management Review Quarterly, Springer, vol. 73(1), pages 353-411, February.
    18. Wang, Ziwei & Yao, Shouyu & Sensoy, Ahmet & Goodell, John W. & Cheng, Feiyang, 2022. "Learning from failures: Director interlocks and corporate misconduct," International Review of Financial Analysis, Elsevier, vol. 84(C).
    19. Wei Shi & Guoli Chen & Boshuo Li, 2023. "Problem Solving or Responsibility Avoidance? The Role of CEO Internal Attribution Tendency in Shaping Corporate Downsizing in Response to Performance Shortfalls," Journal of Management Studies, Wiley Blackwell, vol. 60(5), pages 1273-1301, July.
    20. Han, Han & Zhao, Xueqing & Wang, Zhibin, 2023. "The effect of stock pledge on corporate fraudulence: Evidence from China," Finance Research Letters, Elsevier, vol. 57(C).

    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:kap:asiapa:v:40:y:2023:i:2:d:10.1007_s10490-022-09805-0. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.