Does mutual fund investment influence accounting fraud?

TY - JOUR

T1 - Does mutual fund investment influence accounting fraud?

AU - Wang, Yang

AU - Ashton, John K.

AU - Jaafar, Aziz

N1 - Funding Information: Yang Wang acknowledges financial support from the China Scholarship Council (No. 201408060195 ). Publisher Copyright: © 2019 Elsevier B.V.

PY - 2018/12/31

Y1 - 2018/12/31

N2 - Does mutual fund investment deter accounting fraud? Using a bivariate probit model, this study examines the relationship between mutual funds and accounting fraud between 2007 and 2014. We observed mutual fund investment has significantly higher levels of fraud detection, reducing firms’ propensity to commit fraud. This validates Chinese regulators’ efforts to develop mutual funds to address accounting fraud. Open-end mutual funds outperform closed-end mutual funds in detecting accounting fraud and reducing fraud commission; redeemable shares appear to discipline managers. This effect is moderated by state ownership of listed firms: mutual funds cannot effectively detect fraud in state-owned firms.

AB - Does mutual fund investment deter accounting fraud? Using a bivariate probit model, this study examines the relationship between mutual funds and accounting fraud between 2007 and 2014. We observed mutual fund investment has significantly higher levels of fraud detection, reducing firms’ propensity to commit fraud. This validates Chinese regulators’ efforts to develop mutual funds to address accounting fraud. Open-end mutual funds outperform closed-end mutual funds in detecting accounting fraud and reducing fraud commission; redeemable shares appear to discipline managers. This effect is moderated by state ownership of listed firms: mutual funds cannot effectively detect fraud in state-owned firms.

UR - http://www.scopus.com/inward/record.url?scp=85060080189&partnerID=8YFLogxK

U2 - 10.1016/j.ememar.2018.12.005

DO - 10.1016/j.ememar.2018.12.005

M3 - Article

AN - SCOPUS:85060080189

SN - 1566-0141

VL - 38

SP - 142

EP - 158

JO - Emerging Markets Review

JF - Emerging Markets Review

ER -