Executive Corruption,Firm Performance,and Accounting Information Quality In Listed Companies

In recent years,deep concerns about corruptions are reflected and widely discussed in Internet,which is the case in the "Bai Peizhong Corruption Case”of Shanxi Coking Coal Group,or the“Serious Corruption Case”of CNPC.Based on the background of China's transitional economy,we review relevant domestic and foreign literatures,and sum up the theories of“information-asymmetry”,“principal-agent”,“social-relations”,“social-learning" and "incomplete-information-game-theory".Using the combination of theoretical and empirical analysis,this paper selects 2003-2015 as the research sample period and analyzes the influencing factors,and the impacts on the operation performance and the accounting information quality of executives' corruption behavior in listed companies.The main conclusions of this paper are as follows:Firstly,taking Fraud-Three-Factors Model as the framework and executives'corruption behavior of the listed companies as the object,this paper mainly analyzes the influencing factors,such as:house price,executives' social networ,and government control over the executives' compensation.We use identified risk factors to build a more accurate model to carry out empirical analysis.As the other factors remain unchanged,we find that the higher the house price,the more abundant the social network and the more serious the salary regulation,the higher the probability of corruption behavior.We also find that the above phenomenon is significant in the sample of non-professional social relation,compared to the sample of professional social relation;the above phenomenon is more serious in the sub-sample of state owned enterprises(SOEs),compared with the sub-sample of non-SOEs;the above phenomenon is not significant in the sub-sample after intensified anti-corruption action.In further analysis,we learn from Chiu,Teoh and Tian(2013)'s ideas to test the transmission paths of executives' corruption behavior,we find that up-and-down transmission path and parallel transmission path are the main two transmission paths for executives' corruption behavior of the listed companies.Secondly,according to manually-collected exposed executives' corruption behavior data from 2003 to 2015,we find that executives' corruption behavior has a rather negative impact on the performances of listed companies both in that year and the next year.Furthermore,this paper analyzes that the internal control can alleviate the negative impact of executive's corruption behavior on the operation performance of listed companies to a certain extent.In addition,this paper also explore governance measures for the executives' corruption behavior that plays significant negative role on the operation performance.We find that internal control can effectively curb executives' corruption behavior of listed companies.Thirdly,from the perspective of principal-agent theory,this paper studies the impact of executives' corruption behavior of the listed companies on the accounting information quality of listed companies.The results show that there is a higher probability of financial restatement in listed companies with executives' corruption behavior,and earnings manipulation are used to hide their corruption behavior,which shows a negative impact on the accounting information quality.In the further analysis,it shows that compared with those with lower positions,only executives with higher positions in listed companies could use earnings management behavior to hide their corruption behavior,and they have a positive influence on financial restatements occurrence of listed companies.In summary,this paper studies the influencing factors,and impacts on the operation performance and the accounting information quality of executives'corruption behavior of the listed companies.And we find that simultaneous effects of the three factors,Exposure,Opportunity,and Self-Rationalization,positively influence the probability of executives' corruption behavior.There are two main transmission paths in executives' corruption behavior of listed companies,which are up-and-down transmission path and parallel transmission path.We also find that executives' corruption behavior has a rather negative impact on the performances of listed companies both in that year and the next year.The evidence shows that corruptive executives use accounting information to hide their corruption.Thereupon,this paper puts forward some policy suggestions such as effectively regulating of the real estate market,promoting the reform of state-owned enterprise compensation contract,and improving accounting information disclosure standards and establishing a market of professional managers.In theory,firstly,based on the background of interpersonal social relationship in China,this paper studies the executives' corruption behavior from the perspective of Fraud-Three-Factors,which can help to improve the comprehensive understanding of corporate corruption and make up for the shortcomings of existing research.Secondly,based on the company level,this paper studies whether executives' overt corruption behavior of the listed companies has rather negative impacts on operation performance,which is a replenishment of Cai et al.(2011)and Healy and Serafeim(2015)research,making international academic incremental contribution.Finally,this paper studies the possibility of corruptive executives covering up their corruption practices by providing low-quality accounting information,which makes a specific supporting evidence of Leuz et al.(2003).With academic theoretical incremental contribution,it is conducive to enhance an in-depth understanding of academic community on this issue.In practice,on one hand,the study of the causes of corruption from a multidimensional perspective not only helps us to understand corruption comprehensively,but also helps us deeply understand the state-owned enterprise's remuneration reform policy by providing direct empirical evidence.On the other hand,it is helpful for the government's anti-corruption departments to improve the effectiveness and efficiency of anti-corruption by studying the causes and the impacts on the operation performance and the accounting information quality of executive's corruption behavior in listed companies.