Research On The Financial Report Fraud Based On Manager’s Risk Preference

In view of the listing Corporation financial reporting fraud is frequently occurred, this article attempts to research from a different perspective on its forming mechanism. The majority of previous studies consider the relationship between corporate governance structure and the fraudulent financial reporting, ignored the fact that the management, who plays the role of the company’s financial decision-makers, have different individual characteristics and such difference will effect the fraudulent financial reporting. At present, behavioral economics as an emerging discipline, its basic hypothesis "limited rationality" is more close to the reality when compared with the mainstream economics. This paper combined with behavioral economics theory, based on the managers" limited rationality" premise, try to find that whether managers’different risk preference will have an effect on financial report frauds.This study draws on the utility theory which was based on the "limited rationality" and the decision-makers cannot keep rational all the time, which is different from the traditional economics and therefore it is more close to the real environment. The author think people who have different risk preferences will have different utility from the financial reporting fraud. High risk preferences managers may achieve higher utility from the fraud activity, so managers’risk preference and financial reporting fraud have a positive correlation. In addition, this article also tries to analyze the relationship between managers’risk preference and financial report fraud will be different when the scale and the types of controlling shareholders are different.In this paper, the author choose the manager’s gender, age, job tenure, personal wealth, and the company’s index DI, the property right proportion six variables as the metric management’s risk preference substitution variables, using the principal components method, to empirically test the degree of the correlationship between manager risk preference and the financial reporting fraud. The conclusion of this paper include:(1) the manager’s risk preference and financial reporting fraud are related;(2) When the controlling shareholder of the company is state-owned property, manager’s risk preference and financial reporting fraud’s positive correlation is significantly lower than when the controlling shareholder is non-state-ownered.The article is divided into five parts:the first part is the introduction, introduced this article’s research background, purpose and significance, research ideas and methods; the second part is the literature review, have a summarize on the present domestic and foreign related financial reporting fraud and risk preference of the related research; third part is the theoretical derivation, based on the existing theory to introduce this paper’s studies hypothesis; the fourth section is a empirical study, through establish a mathematical model then have an empirical regression to prove the research hypothesis; the last part is the conclusion and policy suggestion.The contribution of this paper lies in:try to integrate behavioral economics theory into the company’s financial reports fraud related research, and through the empirical way to obtain the corresponding conclusion. Finally, according to the research conclusions, puts forward relevant policy recommendations to prevent the financial reporting fraud.