Can digital transformation alleviate corporate fraud? Evidence from China
Abstract
Purpose
The aim of this paper is to explore the relationship between digital transformation and corporate fraud.
Design/methodology/approach
This paper uses panel data of Chinese listed corporations from 2010 to 2021 and captures digital transformation from the perspectives of awareness and investment by extracting related content from annual reports. Our work investigates whether and how digital transformation influences corporate fraud and examines the moderating effects of the legal environment, media environment and privacy concerns.
Findings
Our findings show that digital transformation, captured either from awareness or actual investment, can significantly alleviate corporate fraud. Our results are robust in a set of endogeneity tests and robustness checks. Additionally, we confirm that digital transformation alleviates corporate fraud through two mechanisms: improving internal monitoring and boosting information flow. Additionally, this alleviating effect is more pronounced for corporations with fewer privacy concerns and in worse legal and media environments.
Practical implications
Our findings provide insights for policymakers to motivate corporations to engage in digital transformation for fraud prevention. We also offer guidelines for corporations to improve their awareness and actual investments in digital transformation and take advantage of its governance effect in preventing corporate fraud.
Originality/value
Overall, we highlight the governance role of digital transformation in alleviating corporate fraud and provide policy implications for regulators in emerging economies to regard digital transformation as an effective tool for fraud prevention.
Keywords
Acknowledgements
Funding: This work was supported by the National Natural Science Foundation of China [72302014; 72402085; 72471027; 71902162]; the China Postdoctoral Science Foundation [2024T170051; 2023M730214]; Humanities and Social Sciences Project of the Ministry of Education of China [24YJC630281; 23YJA630041]; the Lanzhou University’s “Artificial Intelligence+” Philosophy and Social Sciences Special Project Funding [LZUAIYJYB02]; the Philosophy and Social Science Plan Project of Gansu Province of China [2023YB023]; the Postgraduate Innovative Research Fund of the University of International Business and Economics [202445]; and the Innovative Research Project of Sichuan University [2023CX41].
Citation
Shang, D., Yuan, D., Wu, X. and Li, D. (2024), "Can digital transformation alleviate corporate fraud? Evidence from China", Internet Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/INTR-01-2024-0031
Publisher
:Emerald Publishing Limited
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