Leveraging artificial intelligence to detect and prevent corporate fraud in Chinese enterprises
Muhammad Waleed Younas, Shuangyan Li, Umer Sahil Maqsood, R. M. Ammar Zahid · Innovation The European Journal of Social Science Research · 2025
This research examines the impact of artificial intelligence (AI) adoption on corporate fraud, emphasizing the significant role of Chinese government influence in shaping the digital economy. In contrast, AI adoption in European firms follows a regulatory-driven approach, prioritizing compliance and corporate governance within the region’s digital landscape. Therefore, by using Probit model suitable for binary outcome prediction, this study analyzes 3,715 firm-year observations of Chinese A-share listed firms from 2009 to 2020 and finds that AI adoption significantly reduces corporate fraud. Additionally, the mechanism analysis reveals that AI enhances internal control within firms, thereby aiding corporations in their efforts to mitigate fraud. Furthermore, the heterogeneity analysis reveals that the impact of AI on corporate fraud is particularly pronounced in state-owned enterprises (SOEs), firms located in high-fintech regions, and those operating in highly competitive banking sectors. The study’s findings remain robust across various statistical techniques, including 2SLS to address endogeneity, PSM to control for selection bias, and sys-GMM for dynamic panel data analysis. These findings indicate the strong influence of the Chinese government in advancing the digital economy in curbing corporate fraud.