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

Hu, M and Yang, J 2015, 'Fraud, market reaction, and the role of institutional investors in Chinese listed firms', Journal of Portfolio Management, vol. 41, no. 5, pp. 92-109.


Document type: Journal Article
Collection: Journal Articles

Title Fraud, market reaction, and the role of institutional investors in Chinese listed firms
Author(s) Hu, M
Yang, J
Year 2015
Journal name Journal of Portfolio Management
Volume number 41
Issue number 5
Start page 92
End page 109
Total pages 18
Publisher Institutional Investor Inc
Abstract 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.
Subject Banking, Finance and Investment not elsewhere classified
DOI - identifier 10.3905/jpm.2015.41.5.092
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ISSN 0095-4918
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