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Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia

Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia PurposeThis study aims to examine the relationship between the presence of a Malay director on the board and financial statement fraud in Malaysia. Further, the authors investigate whether financial statement fraud firms improve their governance mechanisms compared to non-fraud firms subsequent to the fraud year.Design/methodology/approachThe authors use hand-collected data comprising 76 financial statement fraud and 76 non-fraud firms over a period of eight years from 2001 to 2008.FindingsUsing a univariate and logistic regression model, the results demonstrate a significant positive relationship between the proportion of Malay directors on the board and the financial statement fraud. The authors also find that fraud firms significantly increase the proportion of independent directors on their boards, increase the frequency of board and audit committee meetings and reduce duality subsequent to the detection of financial statement fraud compared to the non-fraud firms.Originality/valueThe findings of the study are useful to policy-makers, regulators, firms and investors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Research Journal Emerald Publishing

Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1030-9616
DOI
10.1108/ARJ-02-2018-0024
Publisher site
See Article on Publisher Site

Abstract

PurposeThis study aims to examine the relationship between the presence of a Malay director on the board and financial statement fraud in Malaysia. Further, the authors investigate whether financial statement fraud firms improve their governance mechanisms compared to non-fraud firms subsequent to the fraud year.Design/methodology/approachThe authors use hand-collected data comprising 76 financial statement fraud and 76 non-fraud firms over a period of eight years from 2001 to 2008.FindingsUsing a univariate and logistic regression model, the results demonstrate a significant positive relationship between the proportion of Malay directors on the board and the financial statement fraud. The authors also find that fraud firms significantly increase the proportion of independent directors on their boards, increase the frequency of board and audit committee meetings and reduce duality subsequent to the detection of financial statement fraud compared to the non-fraud firms.Originality/valueThe findings of the study are useful to policy-makers, regulators, firms and investors.

Journal

Accounting Research JournalEmerald Publishing

Published: Sep 27, 2019

References