Correlation Study Of Political Connection And Financial Fraud

At present, the financial fraud of listed companies is still frequent, even increasingly serious. Existing research are discussed from the Angle of the micro influence factors such as financial identification characteristics and company internal governance for financial fraud,this article attempts from a new Angle, political connection, an external macro perspective to explore their impact on the financial fraud. And the relationship between the government and the company and the influence of the company and government, always is the core content of politics and economics research, therefore, in this paper, combining with the relevant theory of political connection, from the view of political point of relevance to the company’s financial report, in order to analyze and demonstrate if establish a link between political will affect the company’s financial fraud. At the same time,for further study from the Angle of audit fees, to analyze the influence of political connection for financial fraud under different level of the audit cost.The author believes that there is information asymmetry between the company managers and outside investors, through special and appropriate way, executives will transfer its known private information to the market, and the stand or fall of information will affect the value of the company in the capital market. The companies which excellent performance and good operating performance prefer to deliver timely real information to investors, in order to attract investors to invest capital, pull up share prices, on the other hand, when the performance is poorer, companies may germination tendency to false disclosure to prevent the real information lead to share price volatility. If company of poor performance established a political connection, the "umbrella" of political connection will strengthen the possibility of financial fraud undetected, weaken the risk, and increase the chance of fraud. So when operating in poor condition, political affiliates less inclined to disclose the real financial information, but through fraud to give false information to the market, political connection with financial fraud has positive correlation.In this paper, through the establishment of large sample and the mathematical model of logistic, we empirically research the relationship between political connection and financial fraud. This article research conclusion is as follows:(1) there were significant positivecorrelation between political connection of listed companies and financial fraud.(2) other conditions limit, compared with the audit fees with higher levels of the companies, the low level of audit fee companies will markedly enhance its political connection and the correlation of financial fraud. At the same time, this article selects Wan fu sheng ke and the green earth these two typical fraud case to enrich the research background.