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The Effect of Corporate Governance Structure on Fraud and Money Laundering

Author

Listed:
  • Maryam Mousavi

    (Department of Economics and Administrative Sciences, Imam Reza International University of Mashhad, Mashhad 971481151, Iran)

  • Grzegorz Zimon

    (Department of Finance, Banking, and Accountancy, Rzeszow University of Technology, 35-959 Rzeszow, Poland)

  • Mahdi Salehi

    (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran)

  • Nina Stępnicka

    (Faculty of Law and Social Sciences, The Jan Kochanowski University in Kielce, Uniwersytecka 15 Street, 25-406 Kielce, Poland)

Abstract

This paper aims to assess the effect of corporate governance mechanisms, including board members’ and audit committee members’ characteristics, particularly their independence, expertise in terms of finance and industry and efforts on the level of fraud and money laundering (ML) in financial statements of the listed firm on the Tehran Stock Exchange. The procedure of the study is descriptive correlation based on published information from firms listed on the Tehran Stock Exchange from 2014 to 2020, using a sample of 154 firms with 1071 observations. The method used for hypothesis testing is linear regression using panel data. The Benish model is used measure the level of fraud in financial statements, and for ML, the auditors’ opinion are used. The results show that board characteristics, including independence, financial expertise, industry expertise and board effort, as well as audit committee features, such as independence, financial expertise, industry expertise and audit committee effort, have a significant and negative impact on the fraudulent financial reporting and ML. Moreover, since this paper was carried out in an emerging financial market, particularly in Iran, to figure out the effect of corporate governance structures on financial statement fraud and ML, it can provide helpful information for investors and policymakers in this regard.

Suggested Citation

  • Maryam Mousavi & Grzegorz Zimon & Mahdi Salehi & Nina Stępnicka, 2022. "The Effect of Corporate Governance Structure on Fraud and Money Laundering," Risks, MDPI, vol. 10(9), pages 1-25, September.
    • Handle: RePEc:gam:jrisks:v:10:y:2022:i:9:p:176-:d:907947
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    References listed on IDEAS

    as
    1. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    2. Abernathy, John L. & Beyer, Brooke & Masli, Adi & Stefaniak, Chad, 2014. "The association between characteristics of audit committee accounting experts, audit committee chairs, and financial reporting timeliness," Advances in accounting, Elsevier, vol. 30(2), pages 283-297.
    3. Tsagkanos, Athanasios & Argyropoulou, Despoina & Androulakis, Georgios, 2022. "Asymmetric economic effects via the dependence structure of green bonds and financial stress index," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    4. Habib, Ahsan & Jiang, Haiyan, 2015. "Corporate governance and financial reporting quality in China: A survey of recent evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 29-45.
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    Cited by:

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    5. Alena Vagaská & Miroslav Gombár & Antonín Korauš, 2022. "Mathematical Modeling and Nonlinear Optimization in Determining the Minimum Risk of Legalization of Income from Criminal Activities in the Context of EU Member Countries," Mathematics, MDPI, vol. 10(24), pages 1-25, December.

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