Abstract
Limited research has explored the impact of national or industry standards-setting on corporate behavior. In this study, we provide empirical evidence on the negative effect of corporate standards-setting on financial fraud by analyzing manually collected data on the counts and citations of national and industry standards among Chinese listed companies. Our findings reveal that this suppression effect is robust by applying the instrumental variable approach. Our analysis further highlights that corporate standards-setting inhibit financial fraud primarily by increasing the market value of firms, enhancing innovation capacity, sending positive signals, and enabling companies to obtain government subsidies. These results emphasize the critical role of corporate standards-setting in combating financial fraud in emerging markets like China.
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