ESG performance and corporate fraud: Evidence based on the MOE framework

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We investigate the impact of ESG performance on corporate fraud within publicly listed firms in China. Our results show that higher ESG performance significantly inhibits corporate fraud. Mechanism analysis reveals that ESG performance mitigates corporate fraud by easing financial constraints, enhancing analyst coverage and internal control, and alleviating pressures from declining performance. Additionally, heterogeneity analysis demonstrates that the impact of ESG performance on corporate fraud is more pronounced in non-state-owned enterprises and firms with high levels of uncertainty perception. These findings have important implications for regulators, investors, and policymakers to promote ESG practices to mitigate corporate fraud.