Can digital transformation prohibit corporate fraud? Empirical evidence from China

Abstract

ABSTRACT The pace of corporate digital transformation has been accelerating all over the world. This paper investigates the impact of digital transformation on corporate fraud with probit model in Chinese scenario. The results show that the digital transformation of enterprises can help curb the occurrence of fraud in general. However, the heterogeneity test results suggest that the application of digital technology may increase the possibility of some types of fraud as well. Considering possible endogeneity issues, this paper checks the results with the methods of Heckman two-step model and IV probit model and the conclusion remains robust. The empirical results suggest that accelerating the digital transformation of enterprises will help improve the quality of enterprises, optimize the capital market environment, but it is very important to guard against delayed disclosure in digitalization era.