RT Article
T1 Player and Referee Roles Held Jointly: The Effect of State Ownership on China’s Regulatory Enforcement Against Fraud
JF Journal of business ethics
VO 95
IS 2
SP 317
OP 335
A1 Hou, Wenxuan
A1 Moore, Geoff
A2 Moore, Geoff
LA English
YR 2010
UL https://ixtheo.de/Record/1785639293
AB This article examines the impact of the prevailing state ownership in the Chinese stock market on corporate governance and the financial regulatory system, respectively, as the internal and external monitoring mechanisms to deter corporate fraud and protect investors. In line with the literature that state ownership exaggerates the agency problem, we find that the retained state ownership in privatised firms increases the incidence of regulatory enforcements against fraud. For the state-owned enterprises (SOEs), however, larger state ownership is associated with a lower incidence of enforcement actions. This is attributed to the mutual political affiliation of the fraudulent SOEs and the regulatory commission. A new regulation “Solutions for Listed Firm Checks” promulgated in March 2001 has mitigated this effect by empowering the regulatory commission to increase the severity of regulatory conditions. Our evidence confirms the improvement in the regulatory environment and investor protection in the Chinese stock market brought about by the regulatory reform and development.
K1 state ownership
K1 regulatory condition
K1 regulatory commission
K1 Political connection
K1 Investor Protection
K1 fraud inspection
K1 Fraud
K1 regulatory enforcement
K1 Corporate Governance
K1 China
DO 10.1007/s10551-011-0858-1