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Confucianism and corporate fraud

Xudong Tang (School of Business Administration, South China University of Technology, Guangdong, China)
Yan Gu (Fanhai International School of Finance, Fudan University, Shanghai, China)
Ruoyu Weng (Research Center for the Belt and Road Financial and Economic Development, Xiamen National Accounting Institute, Xiamen, China)
Kungcheng Ho (School of Finance, Zhongnan University of Economics and Law, Wuhan, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 5 January 2021

Issue publication date: 14 June 2022

1044

Abstract

Purpose

Confucianism underpins Chinese traditional culture and the values of the Chinese people. The purpose of this study is to examine the relationship between adherence to Confucianism and corporate irregularities.

Design/methodology/approach

The authors use the historical numbers of Jinshi (Imperial Scholars) in the Ming and Qing dynasties within 200 km of a company's location to proxy for the influence of Confucianism on the company, presenting strong evidence that Confucianism significantly reduces corporate irregularities.

Findings

The authors' findings are robust even when criticized with alternative definitions of Confucianism, sensitivity analysis and instrumental variable regression. The authors also discover that this effect is weaker in state-owned and foreign enterprises and weakened by the influence of Western culture.

Originality/value

This paper brings a new traditional-cultural perspective to the understanding of corporate irregularities and contributes to the literature on culture and finance. This paper also helps the authors understand the “China Puzzle” that is China's rapid economic development under an imperfect legal system.

Keywords

Acknowledgements

Funding: The authors were funded by NSSFC number (19ZDA061), NSFC number (71801226, 71903199), Department of Education of Guangdong Province (2020WTSCX024), and Fundamental Research Funds for the Central Universities (2722019JCG021).

Citation

Tang, X., Gu, Y., Weng, R. and Ho, K. (2022), "Confucianism and corporate fraud", International Journal of Emerging Markets, Vol. 17 No. 6, pp. 1425-1445. https://doi.org/10.1108/IJOEM-12-2019-1004

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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