Hierarchical Inconsistency: A Monitoring Mechanism to Reduce Securities Fraud in Emerging Markets
研究发现，在法治薄弱的新兴市场，企业精英在正式组织层级和非正式社会层级中的排名错位（即层级不一致）能产生监控效应，通过引发领导者之间的制衡来减少证券欺诈。
Research has indicated limited effects of formal governance measures on securities fraud prevention in emerging markets due to the weak rule of law. We propose that hierarchical inconsistency, misaligned rank ordering in formal organizational and informal social hierarchies of the corporate elite, can provide a novel monitoring mechanism to reduce securities fraud. Leaders at the top of the two inconsistent hierarchies can feel distressed and motivated to engage in contestation and challenge each other’s authority, thus providing checks and balances and preventing groupthink. This monitoring effect is likely to be stronger when either of the two heads has dominant and unequivocal superiority in their respective hierarchy, making them particularly distressed by the hierarchical inconsistency and prone to contest. We test our argument in the context of publicly listed family-controlled firms in China, where business and family hierarchies may confer superiority to different individuals. Our study contributes to the corporate securities fraud literature by understanding how formal organizational structures and informal social relationships interact and jointly influence governance effectiveness in emerging markets. Funding: This work was supported by the Strategic Management Society [2015 SRF Dissertation Research Grant], Rudolf and Valeria Maag research funds, and INSEAD alumni funds.