IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v10y2022i9p176-d907947.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/10/9/176/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-9091/10/9/176/
    Download Restriction: no
    ---><---

    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. 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.
    3. 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.
    4. 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).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiaoying Liang & Hongjun Wu, 2022. "Does the Tone in Corporate Social Responsibility Reports Misdirect Analysts’ Forecasts in China?," Sustainability, MDPI, vol. 14(24), pages 1-18, December.
    2. Jing Wu & Chee Yoong Liew, 2024. "Revisiting the nexus between corporate social responsibility and corporate value: Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 2066-2085, May.
    3. Salomon Ricardo Bignon Nagnonhou & Joshua Onome Imoniana & Luciane Reginato & Washington Lopes Silva, 2023. "Role of Connectors in Corporate Fraud and Corruptions in Era of Circular Economy," Social Sciences, MDPI, vol. 12(3), pages 1-20, February.
    4. Roman Blazek & Pavol Durana & Jakub Michulek, 2023. "Renaissance of Creative Accounting Due to the Pandemic: New Patterns Explored by Correspondence Analysis," Stats, MDPI, vol. 6(1), pages 1-20, March.
    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vanessa Carvalho Pereira & Antonio Gualberto Pereira & José Sérgio Casé Oliveira, 2023. "Influence of ownership structure on the choice of Big Four independent auditors," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(3), pages 316-326, September.
    2. Alhababsah, Salem, 2019. "Ownership structure and audit quality: An empirical analysis considering ownership types in Jordan," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 35(C), pages 71-84.
    3. Gilberto E. Arce & Edgar Robles C., 2005. "Corporate Governance in Costa Rica," Research Department Publications 3218, Inter-American Development Bank, Research Department.
    4. Klapper, Leora F. & Love, Inessa, 2004. "Corporate governance, investor protection, and performance in emerging markets," Journal of Corporate Finance, Elsevier, vol. 10(5), pages 703-728, November.
    5. Fidrmuc, Jana P. & Jacob, Marcus, 2010. "Culture, agency costs, and dividends," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 321-339, September.
    6. Sang Cheol Lee & Mooweon Rhee & Jongchul Yoon, 2018. "Foreign Monitoring and Audit Quality: Evidence from Korea," Sustainability, MDPI, vol. 10(9), pages 1-22, September.
    7. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    8. Rym Ayadi & Emrah Arbak & Willem Pieter De Groen, 2012. "Executive Compensation and Risk-taking in European Banking," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 8, Edward Elgar Publishing.
    9. Wang, Peipei & Wen, Yuanji & Singh, Harminder, 2017. "The high-volume return premium: Does it exist in the Chinese stock market?," Pacific-Basin Finance Journal, Elsevier, vol. 46(PB), pages 323-336.
    10. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
    11. Jongmoo Jay Choi & Hoje Jo & Jimi Kim & Moo Sung Kim, 2018. "Business Groups and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 153(4), pages 931-954, December.
    12. Heinrich, Ralph P., 1999. "Complementarities in Corporate Governance - A Survey of the Literature with Special Emphasis on Japan," Kiel Working Papers 947, Kiel Institute for the World Economy (IfW Kiel).
    13. Karbowski, Adam, 2009. "The corporate governance implications for China," MPRA Paper 73625, University Library of Munich, Germany.
    14. Wei Huang & Hong Zhang & Abhinav Goyal & Jason Laws, 2019. "Internal capital market mergers in weak external market environment: An emerging market evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 1486-1505, October.
    15. Nadia Saghi-Zedek & Amine Tarazi, 2015. "Droits de contrôle versus droits pécuniaires, crise financière et vulnérabilité des banques européennes," Revue économique, Presses de Sciences-Po, vol. 66(3), pages 527-535.
    16. Gad Jacek, 2020. "The association between disclosures on control system over financial reporting and mechanisms of corporate governance: Empirical evidence from Germany and Poland," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 56(4), pages 351-369, December.
    17. Massimo Colombo & Annalisa Croce & Samuele Murtinu, 2014. "Ownership structure, horizontal agency costs and the performance of high-tech entrepreneurial firms," Small Business Economics, Springer, vol. 42(2), pages 265-282, February.
    18. Hoontaek Seo & Sangho Yi & William McCumber, 2024. "Friendly Boards and the Cost of Debt," JRFM, MDPI, vol. 17(7), pages 1-17, July.
    19. Sergio Destefanis & Vania Sena, 2007. "Patterns of corporate governance and technical efficiency in Italian manufacturing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 27-40.
    20. Huang, Wei, 2016. "The use of management forecasts to dampen analysts' expectations by Chinese listed firms," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 263-272.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:10:y:2022:i:9:p:176-:d:907947. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.