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Fraud, market reaction, and the role of institutional investors in Chinese listed firms

Hu,M, Aggarwal,R and Yang,J 2014, Fraud, market reaction, and the role of institutional investors in Chinese listed firms, Journal of portfolio management, vol. 41, no. 5, pp. 92-109, doi: 10.3905/jpm.2014.41.5.092.

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Title Fraud, market reaction, and the role of institutional investors in Chinese listed firms
Author(s) Hu,MORCID iD for Hu,M
Journal name Journal of portfolio management
Volume number 41
Issue number 5
Start page 92
End page 109
Total pages 18
Publisher Institutional Investor Systems
Place of publication New York, N.Y.
Publication date 2014-12
ISSN 0095-4918
Summary The extent and type of financial fraud committed by listed firms in China, stock market reaction to the detection and announcement of fraud, and the association between institutional ownership and financial fraud are the subjects of this article. Using fraud data from the period between 2001 and 2011, the authors find wide occurrences of fraud and a strong negative market reaction on the announcement date, particularly in cases of serious fraud. Fraud is more likely to occur at firms that have a smaller proportion of independent directors and at poorly performing firms. Firms with higher mutual fund ownership subsequently have fewer incidences of fraud. Our results reports by the authors indicate that ownership by independent institutions, such as mutual funds, serves as an effective monitoring mechanism, deterring fraud and enhancing corporate governance in Chinese capital markets.
Language eng
DOI 10.3905/jpm.2014.41.5.092
Field of Research 150203 Financial Institutions (incl Banking)
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
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