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How does executive pay gap affect enterprises' financial fraud?

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  • Liu, Zhengxu
  • Xie, Jing

Abstract

This paper examines the relationship between executive pay disparity and both the likelihood and severity of corporate financial fraud among A-share listed companies in China from 2015 to 2023. The findings indicate that excessive chief executive officer pay gaps can significantly increase the incidence of financial fraud and exert a stronger effect on the magnitude of fraudulent behavior than on its mere occurrence. This adverse influence is primarily driven by weakened corporate social responsibility awareness and deteriorated governance structures. The study provides meaningful insights for policymakers aiming to prevent financial fraud through improved corporate governance.

Suggested Citation

  • Liu, Zhengxu & Xie, Jing, 2025. "How does executive pay gap affect enterprises' financial fraud?," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325012760
    DOI: 10.1016/j.frl.2025.108018
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