Institutional Investor Ownership And Corporate Information Disclosure Fraud

Corporate Fraud is a trade-off between the expected return of the fraud and the expected cost of the fraud.Corporate Information Disclosure Fraud is reflected in two aspects;fraud propensity and fraud detection.Under the background of the rapid expansion of institutional investors in China and the improvement of relevant laws,can institutional investors restrain corporate information disclosure fraud propensity?When listed companies have already had information disclosure fraud,can institutional investors increase the possibility of fraud detection?Will different types of institutional investors have different influences on corporate information disclosure fraud?Compared with the mature capital markets,China's capital market is still not perfect,and the governance structure of listed companies also has many defects,such as "single-large-shareholder ownership structure".Under the circumstances,will the relationship between the institutional investor ownership and corporate information disclosure fraud be affected?On the other hand,will the institutional environment affect the relationship between the institutional investor ownership and corporate information disclosure fraud?This paper aims to explore the relationship between the institutional investor ownership and corporate information disclosure fraud.To address the issue of the partial observations of corporate fraud,this paper estimates the Bivariate Probit model with the data of the Chinese listed companies over the period of 2006-2015 and finds that,(1)Institutional investor ownership is positively and significantly related to fraud detection,and is negatively and significantly related to fraud propensity after controlling for firm characteristics,other corporate governance factors,industry factors and economics environmental factors;(2)Stable institutional investor ownership is positively and significantly related to fraud detection,and is negatively and significantly related to fraud propensity while unstable institutional investor ownership is not;(3)Control of largest shareholder only weaken the relationship between stable institutional investor ownership and corporate information disclosure fraud detection;(4)Institutional environment not only weaken the relationship between stable institutional investor ownership and corporate information disclosure fraud detection but also weaken the relationship between stable institutional investor ownership and corporate information disclosure fraud propensity.The contributions of this study are mainly manifested in the following two aspects:(1)This paper analyzes the factors that affect corporate information disclosure fraud from the perspective of institutional investor ownership,and provides direct evidence on the relationship between institutional investor ownership and corporate information disclosure fraud.It not only studies the relationship between the overall institutional investor ownership and corporate information disclosure fraud,but also considers affections of different types of institutional investors.As a result,it enriches the research of institutional investor ownership literatures.(2)Based on the internal governance environment and external regulatory environment,this paper considers two moderating variables which are the control of largest shareholder and institutional environment.Therefore,this paper extends the research situation of institutional investor ownership on corporate information disclosure fraud.