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Superstition and corporate financial fraud: evidence from Chinese zodiac year beliefs

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  • Lin Zhang
  • Zepeng Sun
  • Chenlv Zeng

Abstract

Superstitions profoundly influence people’s decisions. While prior research has generated meaningful insights into the antecedents of corporate financial fraud, little attention has been devoted to examining the influence of superstition – a typical informal institution. Integrating the upper echelon theory and loss aversion theory, we investigate the impact of CEOs’ zodiac year belief in Chinese culture on corporate financial fraud. The study posits that CEOs exhibit greater risk aversion and are less likely to engage in corporate financial fraud during their zodiac year due to the heightened perception of risk from the bad luck associated with the zodiac year. Utilizing data from Chinese A-share listed companies from 2008 to 2019, we find a significant negative effect of CEOs’ zodiac year on corporate financial fraud. Moreover, this effect is weakened when CEOs have an overseas background and strengthened when CEOs receive penalties for violations in zodiac year. This study contributes to the literature on antecedents of corporate financial fraud and outcomes of superstitions. Managerial implications and limitations of this study are also discussed.

Suggested Citation

  • Lin Zhang & Zepeng Sun & Chenlv Zeng, 2026. "Superstition and corporate financial fraud: evidence from Chinese zodiac year beliefs," Applied Economics, Taylor & Francis Journals, vol. 58(13), pages 2497-2515, March.
    • Handle: RePEc:taf:applec:v:58:y:2026:i:13:p:2497-2515
    DOI: 10.1080/00036846.2025.2477861
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