This study examines whether firms’ financial fraudulent behavior varies when local firms are led by nonlocal CEOs. Building on the social identity theory, we argue that nonlocal CEOs, due to their different location-based social identities, are perceived as outgroup leaders and face intergroup bias from stakeholders within local firms. Therefore, nonlocal CEOs are more likely to conform to laws and regulations and reduce corporate financial fraud to enhance their legitimacy in leading local firms. Using panel data on Chinese listed firms from 2007 to 2020, we find a significantly negative correlation between nonlocal CEOs and the likelihood of corporate financial fraud. Furthermore, our moderating analysis indicate that the negative effect of nonlocal CEOs on corporate financial fraud is stronger (a) for CEOs who have neverwon awards, (b) in firms with poor financial performance and (c) in regions with tight cultures. Additional mechanism tests indicate that nonlocal CEOs’ outgroup identity is more prominent in regions with low regional dialect diversity and local private-owned enterprises. Overall, these findings suggest that choosing a nonlocal CEO warrants attention from the firm’s top management teams and stakeholders.

Recent financial frauds in China such as Kangmei Pharmaceuticals’ case have raised suspicion in the capital market and among academics about the reliability of accounting information of listed companies, and as a result, various non-financial information that is compulsory or encouraged to be disclosed by regulators and voluntarily disclosed by listed companies is gradually gaining attention from various stakeholders and academics. The corporate social responsibility (CSR) information is one of the most widely disclosed non-financial information by listed firms, but its reliability and motivation are also questionable, for example, is CSR commitment affected by firms’ financial information quality? Using China a-share listed companies that disclosed their corporate social responsibility reports from 2009-2019 as a sample, we investigate whether earnings management can influence corporate social responsibility by analysing the management’s motives embedded in earnings management, in order to further examine whether Chinese listed companies are morally motivated to undertake social responsibility or use social responsibility as a strategic tool to maintain the reputation of the firm and the management. The results of the study show that earnings management and CSR are positively correlated, and the finds continue to be robust when using 2SLS, Heckman two-step regression and propensity score matching to control for reverse causality and self-selection bias, proving that China's listed companies are ethically motivated to fulfil their social responsibility. Therefore, it is important to focus on the quality of earnings information in order to perceive the motivation of CSR when evaluating a company’s CSR commitment.

This article aims to provide an in-depth and comprehensive analysis of PRC Securities Law 2020 which overhauls China’s securities regulatory framework to construct more efficient and transparent capital markets with enhanced investor protection and market integrity. The law constrains regulators’ administrative powers in deciding the outcome of IPOs as well as streamline the securities offering procedure. This article pays attention to key reform initiatives proposed by PRC Securities Law 2020, such as the registration-based IPO system, the enhanced investor protection and compensation regime, the cross-border supervision, and the harsher punishments for securities frauds. It also discusses the latest enforcement cases relating to high-profile financial frauds like the Luckin Coffee scandal which resulted in Luckin Coffee being delisted from NASDAQ in 2020. The analysis in the article is accompanied by relevant US securities law in the same area to offer a comparative angle, which is of interest to practitioners, academics and policymakers in major financial centres.

This paper examines the impact and mechanism of digital finance on financial fraud by constructing a theoretical framework of digital finance affecting corporate financial fraud. We use panel data of Chinese A-share listed companies from 2011 to 2018. The results that digital finance can significantly inhibit corporate financial fraud and improve the ability of financial institutions to identify financial statements. Thus, the incentive and opportunity for corporations to engage in financial fraud is directly reduced. The internal mechanism shows that digital finance can restrain corporate financial fraud by alleviating the financing constraints faced by enterprises, as well as reducing corporate financial fraud by reducing corporate leverage. These effects will reduce debt pressure, thus easing the motivation of corporate financial fraud. The results of heterogeneity analysis that digital finance has a significant inhibitory effect on financial fraud of enterprises with different scales and different property rights.