Study On The Correlation Between Internal Corporate Governance Structure And Financial Reporting Fraud Of Chinese Listed Companies

Financial reporting plays a great role on the management decision-making, the shareholders’ investment, the regulatory supervision, and also on the operating efficiency of the market economy, the stability of the investment environment.Fair financial reports are important to stakeholders in decision-making. Listed companies’financial reports are even more important. It is the most important way for the minority shareholders to understand the company’s financial position and operating conditions. Financial reporting fraud of domestic and international occurs frequently in recent years. Fraud cases also result in huge loss to the investors and damage the stability of the stock market, and prevent the development of capital market, We should govern the financial reporting fraud as soon as possible.For financial reporting fraud, scholars engaged in extensive discussions also yielded important results. Corporate governance has played a key role in the prevention of financial reporting fraud. External governance and internal governance are two key aspects of corporate governance. External governance acts on the control of the owner by the external environmental constraints within the corporate. External governance is lagging, and indirectly dependent on the market, legal, cultural, ethics and other factors. Therefore, the financial reporting fraud governance should mainly focus on internal corporate governance level.The article is based on the angle of internal corporate governance structure, to explore the kind of internal corporate governance structure to strengthen the oversight functions of the owners, to ease the agent problem, to improve internal corporate governance, and to prevent the occurrence of financial reporting fraud.The full text is divided into seven chapters as follows.Chapter Ⅰ are the topics of purpose and meaning, ideas and frameworks. And make the identification taking the theory with practice, quantitative and qualitative combination of normative and empirical binding studies. Chapter Ⅱ is about Literature Review from two angles of abroad and domestic literature review.It reviews the methods and findings of previous studies. Because the legal system, economic development and other factors, domestic and foreign research methods, results are not same.Chapter Ⅲ is the definition and discrimination of financial reporting fraud, corporate governance, corporate governance and financial reporting fraud theory.Chapter Ⅳ is the analysis on the company’s internal governance structure and financial reporting fraud theory, pointing out that the main reason for financial reporting fraud is internal oversight failure. Good internal governance structure ensures the implementation of the internal supervisory authority.Chapter Ⅴ analyzes the fraud home and abroad, financial reporting research conclusions from the shareholder governance, governance of the Board, and Supervisory Board Governance. Combined with this article of the theoretical analysis, I propose20hypotheses about the company’s internal governance structure and financial reporting fraud to be proved.Chapter Ⅵ selected in08to10years because of the financial reporting fraud by the Securities and Futures Commission, the Shanghai Stock Exchange, the Shenzhen Stock Exchange penalties listed companies as our sample.The same industry, company size, fraud year, place of listing, select the financial report is not corrupt as the matching sample. By paired T-test to investigate the ownership structure of financial reporting fraud and non fraud both, the characteristics of the board of directors, board of supervisors characteristics with or without significant difference. And through the establishment of a logistic regression model to investigate the ownership structure, board characteristics, board of supervisors of the characteristics of financial reporting fraud.Chapter Ⅵ selecst the listed companies in2008to10years of financial reporting fraud is punished as a sample, and select the standards on the same industry, company size, corrupt annual listing venue for the selection of the financial report not fraud company as a match sample. It investigate the ownership structure, board characteristics of financial reporting fraud by paired T-Test and the logistic regression models.Chapter Ⅶ draws conclusions as follows. The higher ratio of the state-owned shares is, the greater the likelihood of financial reporting fraud. The higher the proportion of the tradable shares is, the greater the likelihood of financial reporting fraud is. The greater size of the board of directors is, the smaller possibility of financial reporting fraud. The higher stake of the Board is, the smaller the possibility of the company’s financial fraud. Board of Directors held more, the greater likelihood of financial reporting fraud happens.I suggest we should take measures from the three ways of shareholder governance, Board Governance, Board of Supervisors governance to improve internal corporate governance, strengthen the prevention and control of financial reporting fraud.The main contributions of this paper are:Global and local combination of normative and empirical research is the combination of theoretical significance and practice.Due to my level limit and limited space of this article, there are some inadequacies as follows:External corporate governance is explored not enough. Internal corporate governance mechanisms such as incentive pay, equity incentive are not involved. The empirical research was not thorough.I Hope this article play a little help to govern financial reporting fraud.