| Summary: | 碩士 === 國立彰化師範大學 === 會計學系 === 103 === The increasing corporate fraud was occurred in many enterprises frequently so that it leads to major losses for the many general investors. In addition, elections in Taiwan have become increasingly frequent. Various election campaigns occurring every few years have resulted in increasingly intense crony capitalism. The issue of the relation between financial reliability and political connections has caused concern among academics, practitioners and regulators. This study utilizes a logistic regression model to investigate the association between political connections and corporate fraud. The research sample comprised 228 firms, in which fraudulent actions were observed between 1998 and 2013. In addition, paired samples were selected from firms of similar scale and in the same industry at a ratio of 1:3. This study adopted two methods for measuring the political connections. First, I evaluated whether a firm filled positions in their executive management (i.e., director of the board, supervisor, and department manager) by hiring current or former government officers, including the president of the Republic of China (R.O.C.), presidents and vice presidents of the five administrative branches, city mayors, county magistrates, legislators, and county or city councilors. Second, we assessed the campaign donation amount the firms contributed to the five major political parties in Taiwan (i.e., Kuomingtang, Democratic Progressive Party, People First Party, Taiwan Solidarity Union, and New Party). The empirical results indicate that the political connections are significantly and positively correlated with corporate fraud, indicating that the firms that hire former or current government officials in executive management role are more likely to engage in fraudulent activities than other firms. However, the political donations are not significantly correlated with corporate fraud.
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