Managerial Power, Product Market Competition And Financial Fraud Of Listed Companies: An Empirical Study

Financial fraud of listed company is a serious problem which hinders the development of capital market、dampens the confidence of investors and causes significant damage to the interests of the investors. As a provider of financial information, the behaviors of the managers influence the generation and disclosure of financial information, thus should be responsible for financial fraud. The managerial power affects the managers’ behaviors, and it is also influenced by various internal and external governance mechanisms. At the same time, the existing research stressed that when considering the corporate governance, the internal and external governance factors shall be taken into consideration as a whole from an integrated perspective. We also should pay attention to the interactive relationship between the governance mechanisms. Therefore, in the situation of considering the interaction effect, study the effects of managerial power on financial fraud will be of great significance.Based on relevant theories and previous research results, this study uses listed companies involving financial fraud in the statement of punishment which announced by the SEC、Shanghai stock exchange and Shenzhen stock exchange from2008to2013as research samples. The paired samples are also chosen accordance to some standards. The author then studies how the interactive impacts between the managerial power and relative governance mechanisms influence the financial fraud of the listed companies empirically. Finally, the article put forward some suggestions according to the empirical results.The conclusion shows that:(1)There is no significant relationship between the managerial power itself and the financial fraud.(2) When take the interactive impacts between the managerial power and the internal and external governance mechanisms into consideration, the managerial power has a significant positive effect on the financial fraud. There is no significant interactive impact between the managerial power and the product market competition. The independence of the board and the nature of state-owned property can decrease the marginal effects which managerial power has on the financial fraud, showing a significant alternative relationship. The share ratio of the largest shareholder decreases first and then increases the marginal effect of managerial power on the financial fraud, showing an alternative and complementary relationship.(3)There are significant positive relationships between the CEO duality、managers’ education、tenure and the financial fraud except the internal promotion. Some governance mechanisms can further increase or decrease the marginal effect of financial fraud by means of influencing the CEO duality、 managers’ education and tenure. Finally, this paper does not find any significant interactive impact between the governance mechanisms and the internal promotion.