The effect of digitization on corporate fraud detection evidence from China

In this paper, we explore the impact of firm digitization on corporate fraud, focusing on Chinese publicly listed companies. Our findings show that firms with higher levels of digitization are less likely to engage in fraud and are more likely to be detected if fraud occurs. This effect is especially pronounced in environments with high information asymmetry and low external scrutiny, highlighting the positive role of digitization in improving governance through enhanced information disclosure. Additionally, digitization strengthens internal controls and operational performance. Our research shows that technological advancements play a key role in regulating corporate behaviors. This finding not only adds to the studies of corporate misconduct but also provides strong support for the government's commitment in digital transformation across businesses. •Firms with higher levels of digitization are less likely to commit fraud and are more likely to be detected if fraud occurs.•Digitization reduces information asymmetry between firms and regulations.•Digitization produces a wealth of reliable information.•Technological advancements are crucial in regulating corporate behaviors.