Impact of Country Governance and Financial Development on Corporate Fraud Cases: A Cross Country Perspective
DOI:
https://doi.org/10.61506/01.00359Keywords:
Country governance, Financial development, Corporate fraud cases, Fixed effect model, Quantile RegressionAbstract
This study aims to examine the impact of country governance and financial development on corporate fraud cases across countries' perspectives from the year 2012-2018 by using country- wise data. This study runs different statistical models like descriptive, correlations, Random effect model, fixed effect model. This study chooses a fixed effect model based on the Hausman test and used Quantile regression for robustness and interquartile 0.25 to 0.75 difference regression models to find out the difference that the effect of variables are significant or insignificant at different quartile. The results of the different models show that country governance having a significant impact on corporate fraud cases and the association is negative thus improvement in country governance would expectedly reduce the corporate fraud cases. while financial development in terms of the financial market has a significant impact on corporate fraud cases and association is positive thus the development of a financial market where different financial products and instruments with less knowledge have the probability to be easily used for fraud. whereas financial development in terms of financial institutions having a significant effect on corporate fraud cases and the relationship is negative thus improvement in financial institutions like the security exchange commission of Pakistan and state bank would certainly minimize the corporate fraud cases.
References
Albrecht, W., Albrecht, C. C., & Albrecht, C. O. (2004). Fraud and corporate executives: Agency, stewardship and broken trust. Journal of Forensic Accounting, (5), 109-130
Arizala, F., Cavallo, E., & Galindo, A. (2013). Financial development and TFP growth: cross-country and industry-level evidence. Applied Financial Economics, 23(6), 433-448. DOI: https://doi.org/10.1080/09603107.2012.725931
Dong, W., Liao, S., & Zhang, Z. (2018). Leveraging financial social media data for corporate fraud detection. Journal of Management Information Systems, 35(2), 461-487. DOI: https://doi.org/10.1080/07421222.2018.1451954
Ellis, J. A., Moeller, S. B., Schlingemann, F. P., & Stulz, R. M. (2017). Portable country governance and cross-border acquisitions. Journal of International Business Studies, 48(2), 148-173. DOI: https://doi.org/10.1057/s41267-016-0029-9
Giannetti, M., & Wang, T. Y. (2016). Corporate Scandals and Household Stock Market Participation. Journal of Finance, 71(6), 2591–2636. DOI: https://doi.org/10.1111/jofi.12399
Gupta, P. K., & Gupta, S. (2015). Corporate frauds in India - Perceptions and emerging issues. Journal of Financial Crime, 22(1), 79–103. DOI: https://doi.org/10.1108/JFC-07-2013-0045
Li, M., Makaew, T., & Winton, A. (2021). Cheating in China: Corporate Fraud and the Role of Financial Markets. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3757949 DOI: https://doi.org/10.2139/ssrn.3757949
Máté, D., Sadaf, R., Oláh, J., Popp, J., & Szűcs, E. (2019). The effects of accountability, governance capital, and legal origin on reported frauds. Technological and Economic Development of Economy, 25(6), 1213–1231. DOI: https://doi.org/10.3846/tede.2019.10717
Permana, B. A., Perdana, H. D., & Kurniasih, L. (2017). Determinant of fraud in government agency: empirical study at the finance and development supervisory agency (BPKP) of jakarta representative office. Asia Pacific Fraud Journal, 2(1), 93-108. DOI: https://doi.org/10.21532/apfj.001.17.02.01.08
Sadaf, R., Oláh, J., Popp, J., & Máté, D. (2018). An investigation of the influence of theworldwide governance and competitiveness on accounting fraud cases: A cross-country perspective. Sustainability (Switzerland), 10(3), 588. DOI: https://doi.org/10.3390/su10030588
Wang, T. Y., & Winton, A. (2014). Product Market Interactions and Corporate Fraud. SSRN Electronic Journal. DOI: https://doi.org/10.2139/ssrn.2398035
Wang, T. Y., Winton, A., & Yu, X. (2010). Corporate fraud and business conditions: Evidence from IPOs. Journal of Finance, 65(6), 2255–2292. DOI: https://doi.org/10.1111/j.1540-6261.2010.01615.x
Yiu, D. W., Wan, W. P., & Xu, Y. (2019). Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China. Journal of Management, 45(7), 2685–2720. DOI: https://doi.org/10.1177/0149206318764296