The rapid development of finance is accompanied by the trend of new type and digitization, and at the same time, the phenomenon of financial fraud has also emerged. Based on CHFS micro data and official macro data respectively, this paper uses entropy weight method Topsis to construct a three-level and more universal financial development index, which proves the positive relationship between financial development and financial fraud through both macro and micro dimensions. At the micro level, this relationship is transmitted through risk appetite and exogenous financing ability, and is more significant in the micro groups of eastern region, low education level, and non-financial practice. At the macro level, this relationship is further attributed to the increase in financial development potential and the development of Internet finance, while the increase in the size of the traditional financial market and financial regulatory inputs contribute to the regulation of financial fraud. The paper accordingly provides policy recommendations to help build more transparent, regulated and healthy financial markets.
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