Financial Shared Service Centers and Corporate Misconduct: Evidence from China

This paper examines the effect of financial shared service centers (FSSCs) on corporate misconduct. Using a sample of Chinese public companies with hand-collected FSSC data, we find that the adoption of FSSCs is negatively associated with the likelihood and frequency of corporate misconduct. The results hold to a battery of robustness tests. Moreover, we show that the negative association between FSSCs and corporate misconduct is more pronounced in firms that have no management equity ownership, disclose internal control weaknesses, and have more subsidiaries. Additional analyses indicate that FSSCs can help mitigate both disclosure-related and nondisclosure-related misconduct.