Does Managerial Foreign Experience Deter Corporate Fraud

Abstract

We explore how managers with foreign experience affect corporate fraud in China. By employing a bivariate probit model with partial observability, we find that returnee managers significantly reduce the incidence of corporate fraud, and increase the probability of being detected, dependent on the given fraud. Improved corporate information environment may mainly drive our results. Furthermore, the impact of returnee managers on fraud deterrence also varies according to the different nature of foreign managerial experience, positions of returnee managers, and types of corporate frauds. Overall, we offer new evidence that returnee managers have an increased awareness of corporate fraud.

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