Corporate fraud is pervasive in the Chinese capital market. Nearly one-fifth of the firms in China have been subject to enforcement action by the China Securities Regulatory Commission (CSRC) triggered by a violation of securities laws. Prior literature documents that consequences of corporate fraud being exposed via enforcement actions: among others, firms have experienced a significant loss in market value and stock liquidity (e.g., for China, Chen et al., 2005). While the determinants of the fraud at the firm level and the consequences of it for equity holders have been documented extensively, this chapter investigates the impact of fraud on the cost of debt for Chinese firms. Debt financing represents an important source of corporate finance in China, given that leverage ratios are around 0.5 for the average- and median-listed Chinese firms.