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Digital currency as a “watchdog”: Central bank digital currency and corporate misconduct

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  • Wang, Chuyu
  • Chan, Kam C.
  • Zhang, Guanglong

Abstract

This study examines the impact of central bank digital currency (CBDC) on corporate misconduct, including accounting fraud, fund misappropriation, disclosure manipulation, and inappropriate trading activities. Leveraging the gradual rollout of the Electronic Chinese Yuan (e-CNY) across China, we find that CBDC adoption reduces misconduct among treatment firms in pilot regions compared to control firms. Grounded in fraud triangle theory, our mechanism analyses indicate that e-CNY’s transparency, traceability, and immutability diminish incentives, reduce opportunities, and deter the rationalization of corporate misconduct. Consequently, managers exhibit a lower propensity to engage in accounting fraud, fund misappropriation, and disclosure manipulation. Further analyses demonstrate that reduced corporate misconduct, driven by e-CNY adoption, significantly lowers stock price crash risk. Overall, our findings highlight the potential of CBDCs to serve as an effective “watchdog” in curbing corporate fraudulent behavior.

Suggested Citation

  • Wang, Chuyu & Chan, Kam C. & Zhang, Guanglong, 2026. "Digital currency as a “watchdog”: Central bank digital currency and corporate misconduct," Journal of Business Research, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:jbrese:v:210:y:2026:i:c:s0148296326001505
    DOI: 10.1016/j.jbusres.2026.116116
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