An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Yi Zhang
Peking University

Abstract: This paper empirically examines whether certain corporate governance mechanism are related to the probability for a firm to be associated with corporate scandal in China. We find that the ownership of the firm are related to the probability for a firm to commit scandal. However there is no evidence that other corporate governance characteristics are related to the probability for a firm to commit scandal, including the board size, independent directors, and the institution ownership. Our findings suggest that the western governance mechanisms introduced to China has not been able to help to avoid serious corporate scandals in China. Instead, we find that the level of development of legal system are related to the probability for a firm to commit scandal.

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