The Relationship Between Corporation Governance And The Finacial Fraund:Evidence From Chinese Listed Companies

The financial report of the listed company is one of the important information carriers. The stakeholders make decisions due to the information of financial report. Therefore, the quality of financial reporting is particularly important. Unfortunately in recent years, many fraud scandals of listed companies at home and abroad have been disclosed. It makes the stakeholders significantly doubting the authenticity of the financial reports, and losing the confidence in the capital market. Preventing the occurrence of financial fraud and how to identify whether there is a financial fraud of listed companies are paid more attention at the present stage. The improvement of internal management to prevent fraud risk is undoubtedly the rapidest and the most effective method. In this paper, we analysis the internal corporate management governance characteristics, which will show the existence of the financial fraud of listed companies, and provide some advice in the future, at the same time, the outside investors can judge the quality of financial information of listed companies basis on this essay.Firstly, this essay reviews the research of the internal corporate governance, financial fraud and the relationships between them both home and abroad. Then, the hypothesis has been built basing on the theoretical analysis. The fourth chapter is the empirical analysis which states the dependent variables, explanatory variables, and control variables, and definite the meaning of each variable. This section also chose the non-fraudulent companies as the control group.The model of this essay consists of four aspects basing on the hypothesis. The fifth chapter involved the empirical analysis including the logistic analysis, T test, descriptive statistics analysis and robustness analysis. On the deeply research of the relationships between four respects and the financial fraud which are the characteristics of the board of directors, ownership structure, executive incentive and the board of supervisors, we found that the membership of the board, the number of board meetings,the ratio of Independent directors in the board, the opinion of the independent directors, the percentage of the par-time independent directors, the number of boards’meetings, the state-owned share-holding rate, the senior management personnel share-holding rate; the combination of general manager and chairman of the board, shareholding ratio of the board of supervisors, the number of meetings of the supervisory board have a significant correlation with financial fraud at the5%confidence interval.Through the above study, there are some advices given to the listed companies to enhance the level of corporate governance and prevent the fraud effectively. On the way of improving the management is increasing the board size, increasing the drawing view of the independent director, decreasing of the number of the par-time-independent director.The effective way to enhance the ability of management of the shareholder convention, is to reduce the number of shareholders’general meeting and state-owned share-holding rate. The way to improve the corporate governance also including controlling the share-holding rate of the senior management personnel, avoiding the combination of general manager and chairman of the board,keeping the shareholding ratio of the supervisors board on the reasonable level, increasing the number meeting of the supervisors board.