Does Bank Monitoring Reduce Corporate Misreporting? Evidence from Foreign Bank Entry in China

• 成果类型: Article
• 署名作者: Li, Minwen; Makaew, Tanakorn; Winton, Andrew
• 署名单位: Tsinghua University; University of Southern California; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.02414
• 发表日期: 2025
• 关键词: Bank monitoring; corporate securities fraud; Misreporting; banking liberalization

摘要

We propose a model of bank monitoring and borrower financial misreporting. Using the staggered liberalization of the banking sector in China as a natural experiment, we find that, consistent with the model's prediction, entry by more efficient foreign banks reduces corporate misreporting fraud. Fraud reduction is greatest among borrowers of foreign banks, but fraud also drops among borrowers of domestic banks, suggesting a spillover effect. As predicted by the model, fraud reduction is greatest for borrowers with higher levels of fixed assets or lower levels of current assets. Our evidence suggests that improved bank monitoring reduces financial misreporting.