THE RELATION BETWEEN FINANCIAL FRAUD AND GOVERNMENT SUBSIDY OF CHINESE LISTED COMPANINES

Nowadays, financial fraud of the public firms draws serious attention in developing countries. We focus on the relation between financial fraud and government subsidy of Chinese public firms, as in China government subsidy is an important factor for companies’ performance. We provide four hypotheses concerning the relation between the magnitude of the subsidy depending on different firm characteristics. We find that we cannot reject the null, and for the most part, government subsidies are affected not only by fraud, but also on the degree to which the executives and firms are related to the government.