Factors of Fraud Occurrence and Corporate Governance Structures: Evidence from Emerging Market Malaysia

Zuraidah Zam, Wee Ching Pok, Abdullahi Ahmed

    Research output: Contribution to journalArticlepeer-review

    3 Citations (Scopus)

    Abstract

    The main objective of this research is to examine the possible factors of the corporate environment which may contribute to the occurrence of fraud by investigating whether there are any differences in corporate governance, earnings management activities and compensation structures between scandal and non-scandal firms. The sample of this study consists of 57 scandal firms matched with non-scandal firms in the Malaysian financial environment. The scandal firms are the Malaysian publicly listed companies which have been reported to be involved in fraud over the period 1995 to 2008. Non-parametric tests such as Paired t-test and the Wilcoxon signed-rank test are conducted to investigate the differences in characteristics of the two sub-groups (scandal firms vs. non-scandal firms). The results show that the independent directors of scandal firms were holding fewer directorships. In addition, there is evidence to show that scandal firms are reporting lower earnings and therefore paying lower dividends. However, no significant differences are found in the compensation structures of the executive directors in both sets of our sample. The results of the logistic regression reveal that factors such as the nature of dividend payments; the effectiveness of independent committees and the influence of powerful/dominant positions in a company may have been contributing to fraud.

    Original languageEnglish
    Pages (from-to)135-153
    Number of pages19
    JournalCorporate Ownership and Control
    Volume11
    Issue number3
    DOIs
    Publication statusPublished - 2014

    Keywords

    • Compensation
    • Corporate governance
    • Earnings management
    • Fraud
    • Malaysia

    Fingerprint Dive into the research topics of 'Factors of Fraud Occurrence and Corporate Governance Structures: Evidence from Emerging Market Malaysia'. Together they form a unique fingerprint.

    Cite this