Performance Appraisal,Organizational Ethical Climate And Fraud

Fraud is a serious social and economic issue that can seriously affect a wide range of stakeholders,including board members,top management,employees,auditors,creditors and shareholders.In recent years,with the increasingly fierce competition in the market,enterprises seek the interests of becoming larger,all kinds of financial fraud cases frequently,thus,the normal operation of the capital market has been severely affected,which results in a global emphasis on business ethics.To cope with these negative effects caused by fraud and the public's panic about fraud,scholars have stepped up their studies on fraud and corporate ethics.Fraudulent activities,like other illegal economic acts,do not exist in isolation but as a result of people's profit-making behavior and the specific institutional background.In summary,they are the result of collisions between people's psychological motives and various control systems.Therefore,it is necessary to discuss the influence of the institutional environment of the enterprise on the employee's tendency of fraud and the intention and tendency of psychologically restraining employees from performing fraud.At present,the researches on fraud mainly focus on two aspects.On the one hand,it mainly reflects the correlation between certain factors and fraud,that is,the possibility of fraud or increased fraud when certain factors exist.On the other hand,these studies mainly focus on the study of the impact on fraud from rigid formal control aspects such as institutional constraints,process control and reward and punishment mechanisms.The researches of these scholars have laid a solid foundation for the study of fraud,however,it generally overlooked the possible roles that soft constraints such as corporate culture and corporate ethics may play and how these factors work together to influence the behavioral tendencies of the fraudsters.Therefore,based on the Social Control Theory of Hollinger and Clarke(1982),we focused on the combined effect of formal control and informal control on the fraud tendency of employees.We viewed the performance appraisal as the formal control,and the organizational ethical climate as the informal control,collected data from the way of sending out questionnaires,examined the impact of the performance appraisal and the organizational ethics on employee fraud.Through empirical tests,this paper concludes that the developmental performance appraisal and the principled organizational ethical climate respectively decrease the employees'fraud tendencies,yet the instrumental ethical climate stimulates employees' fraud tendencies.There is no significant correlation between the caring organizational ethical climate and the fraud tendency of employees.As for the interaction,the interaction between the principled organizational ethical climate and the developmental performance appraisal is verified,and the two works together to restrain employees' fraud tendencies;moreover,the interaction between the caring organizational ethical climate and the evaluative performance appraisal is also verified.But the interation direction is opposite to the hypothesis.However,the impact of evaluative performance appraisal on employees' fraud tendencies is not supported by data in this study.Therefore,appraisal-based performance appraisal does not necessarily lead to an increase in employee fraud tendency.