ABSTRACT
This paper examined the effect of academic independent directors on the incidence of corporate fraud in a sample of listed Chinese companies from 2007 to 2017. A significant inhibitory effect on fraudulent activities was found when academic directors were on the board, which was stronger when the academic directors were highly reputable or from legal and accounting backgrounds. Negative relationships between academic directors and the likelihood of fraud commission and positive relationships for the likelihood of fraud detection were also proven. This study highlighted the corporate fraud prevention effect that academic independent directors can have on company operations.
Disclosure statement
No potential conflict of interest was reported by the authors.
Correction Statement
This article has been republished with minor changes. These changes do not impact the academic content of the article.
Notes
1. The Guidelines issued by the China Securities Regulatory Commission in August, 2001 clarified the regulatory requirements for board construction in listed companies with the aim of improving Chinese corporate governance.
2. Project 985 and 211 refers to the national key university and college project initiated in 1995 and 1999 by the Ministry of Education of the People’s Republic of China, which is often used as a measure of university ranking and prestige.