[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-detail-56159-en":3,"doc-seo-56159-105":30,"detail-sidebar-cat-0-en-105":91},{"code":4,"msg":5,"data":6},0,"success",{"doc_id":7,"user_id":8,"nickname":9,"user_avatar":10,"doc_module":4,"category_id":11,"category_name":12,"doc_title":13,"doc_description":14,"doc_content":15,"file_id":16,"file_url":17,"file_type":18,"file_size":19,"view_count":20,"is_deleted":4,"is_public":21,"is_downloadable":21,"audit_status":21,"page_count":22,"language":23,"language_code":24,"site_id":25,"html_lang":24,"table_of_contents":26,"faqs":27,"seo_title":13,"seo_description":14,"update_tm":28,"read_time":29},56159,1099513958762,"Logic","https://ap-avatar.wpscdn.com/avatar/1000023916a998db790?x-image-process=image/resize,m_fixed,w_180,h_180&k=1782109480056885918",8,"Research & Report","Employee Treatment and Corporate Fraud","This paper investigates how a firm’s treatment of employees relates to its propensity to commit corporate fraud. Firms characterized by fair employee treatment are found to be less likely to engage in fraud, consistent with labor-friendly incentives to signal implicit contract fulfillment and sustain long-term employment relationships. Employee involvement and cash profit-sharing are identified as the most influential components. The negative link intensifies in high-tech industries, less competitive industries, and contexts where employees have fewer outside opportunities. Results are not explained by employees’ moral sensitivity or other labor-related factors such as wages, pensions, or union power.","Journal Pre-proof  \nEmployee treatment and corporate fraud  \nJian Zhang, Jialong Wang, Dongmin Kong  \nPII: S0264-9993(18)31810-8  \nDOI: [https://doi.org/10.1016/j.econmod.2019.10.028](https://doi.org/10.1016/j.econmod.2019.10.028)  \nReference: ECMODE 5051  \nTo appear in: Economic Modelling  \nReceived Date: 11 December 2018  \nRevised Date: 24 September 2019  \nAccepted Date: 29 October 2019  \nPlease cite this article as: Zhang, J. , Wang, J. , Kong, D. , Employee treatment and corporate fraud, Economic Modelling (2019), doi: [https://doi.org/10.1016/j.econmod.2019.10.028](https://doi.org/10.1016/j.econmod.2019.10.028) .  \nThis is a PDF file of an article that has undergone enhancements after acceptance, such as the addition of a cover page and metadata, and formatting for readability, but it is not yet the definitive version of record. This version will undergo additional copyediting, typesetting and review before it is published in its final form, but we are providing this version to give early visibility of the article. Please note that, during the production process, errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.  \n© 2019 Published by Elsevier B.V.  \nEmployee Treatment and Corporate Fraud  \nJian Zhang  \nSchool of Business and Management Shanghai International Studies University  \n550 Dalian West Road, Shanghai Shanghai, 200083  \nEmail: [j](jianzhang@shisu.edu.cn)[ianzhang@shisu.edu.cn](jianzhang@shisu.edu.cn)  \nPhone: +86 13023270249  \nJialong Wang  \nSchool of Finance Southwestern University of Finance and Economics  \n555 Liutai Avenue, Chengdu Sichuan, 611130  \nEmail:  [117020204057@2017.swufe.edu.cn](117020204057@2017.swufe.edu.cn)  \nPhone: +86 18516767986  \nDongmin Kong 1  \nSchool of Finance Zhongnan University of Economics and Law 182\\# Nanhu Avenue, Wuhan Hubei, 430073 P.R. China [E-mail: ](E-mail: kongdm@hust.edu.cn)[kongdm@hust.edu.cn](E-mail: kongdm@hust.edu.cn)  \nPhone: +86 15927068886  \n1 The corresponding author.  \nEmployee Treatment and Corporate Fraud  \nAbstract:  \nThis paper examines the association between a firm’s relations with its employees and its likelihood of committing fraud. We find that firms treating their employees fairly (as measured by employee treatment index) have a lower likelihood of committing fraud since labor-friendly firms have incentives to signal their willingness to fulfill implicit contracts and maintain long-term relationships with employees. Further analysis shows that employee involvement and cash profit-sharing are the most important components in employee treatment to determine our results. Moreover, we show that the negative association between employee treatment and fraud propensity is more prominent when a firm is in a high-tech industry, when a firm in a less competitive industry, and when employees have less outside employment opportunities. Finally, we show that our results are not driven by the employee’s moral sensitivity or other labor related factors (i.e. labor wage, pension benefits, and labor union power) .  \nJEL classification: G34  \nKey words: Employee Treatment; Corporate fraud; Stakeholder; Implicit Contracts  \nEmployee Treatment and Corporate Fraud  \n1. Introduction  \nRecent high-profile corporate fraud scandals in U.S. result in tremendous losses to both shareholders (i.e. the owners of corporations) and stakeholders (i.e. employees, customers, and suppliers) . Both shareholders and stakeholders have incentives to limit fraud commitment. A large number of papers argue that shareholders can prevent managers from committing fraud by either improving the corporate governance quality (Beasley, 1996; Dechow et al., 1996; Agrawal and Chadha, 2005) or limiting managers’incentives for self-interest behaviors (Bergstresser and Philippon, 2006; Burns and Kedia, 2006) . While these studies strengthen our understanding of shareholders’ interest to prevent fraud, they pay almost no attention on stakeholder","cbCainftuI6A4Uqu","https://ap.wps.com/l/cbCainftuI6A4Uqu","pdf",589778,3,1,44,"English","en",105,"# Introduction\n## Fraud incentives and stakeholder perspective\n## Employee treatment and implicit contracts\n## Empirical motivation and measurement framework","[{\"question\":\"How does employee treatment affect a firm’s likelihood of committing corporate fraud?\",\"answer\":\"Firms that treat employees more fairly show a lower likelihood of committing fraud, as labor-friendly firms have incentives to signal they will honor implicit contracts and maintain long-term employee relationships.\"},{\"question\":\"Which components of employee treatment are most important in the analysis?\",\"answer\":\"Employee involvement and cash profit-sharing are identified as the most important components driving the observed relationship between employee treatment and fraud.\"},{\"question\":\"When is the negative association between employee treatment and fraud propensity strongest?\",\"answer\":\"The negative association is more prominent in high-tech industries, in less competitive industries, and when employees have fewer outside employment 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