The Influence of Corporate Governance Mechanisms on Fraud Probability: Evidence from Russian Companies

Мұқаба

Дәйексөз келтіру

Толық мәтін

Аннотация

This study examines the impact of corporate governance mechanisms on the probability of corporate fraud occurrence. We evaluate the board size, the degree of independence, and the frequency of meetings of the board and its committees. We also attempt to analyse the board’s gender diversity, but since boards are not gender-diverse in Russia, the significance of this variable cannot be tested. Our empirical study is based on 160 observations of MOEX-listed Russian companies, among which fraudulent behaviour has been revealed in 32 companies over a 5-year period from 2014 to 2018. The relationship between the probability of fraud occurrence and corporate governance was investigated employing a logit model. The data was collected from firms’ annual reports and Thomson Reuters Eikon. Data on fraud cases is based on the evidence from the press (including the leading news sources and specialised websites). We detected a significant negative relationship between nomination and remuneration committee chairmen’s independence, the share of independent directors, the independence of board and audit committee chairmen and the likelihood of fraud. We also discovered the insignificant influence of board and its committees’ size and their meetings’ frequency on fraud probability. This paper contributes to the academic research on the relationship between corporate governance mechanisms and probability of fraud occurrence, emphasizing the special role of the establishment of nomination and remuneration committee chairman independence in Russian companies.

Авторлар туралы

O. Soboleva

HSE University, Moscow, Russia

Хат алмасуға жауапты Автор.
Email: osoboleva@hse.ru

E. Makeeva

HSE University, Moscow, Russia

Email: emakeeva@hse.ru

G. Aslanyan

Yandex Technologies, Moscow, Russia

Email: g_aslanyan@inbox.ru

Әдебиет тізімі

  1. Grechanic, L., Abdullina, A., & Kareev, O. (2017). Deloitte legal insight.
  2. Marzuki, M. M., Haji-Abdullah, N. M., Othman, R., Wahab, E., & Harymawan, I. (2019). Audit committee characteristics, board diversity, and fraudulent financial reporting in Malaysia. Asian Academy of Management Journal, 24 (2):143-167. DOI: https://doi.org/10.21315/aamj2019.24.2.7
  3. Fama, E., & Jensen, M. (1998). Separation of Ownership and Control. FOUNDATIONS OF ORGANIZATIONAL STRATEGY, Harvard University Press and Journal of Law and Economics, Vol. 26, June 1983. DOI: https://doi.org/10.1086/467037
  4. 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., https://doi.org/10.1177/0149206318764296. DOI: https://doi.org/10.1177/0149206318764296
  5. Brazel, J. F., & Schmidt, J. J. (2019). Do auditors and audit committees lower fraud risk by constraining inconsistencies between financial and nonfinancial measures? Auditing, 38 (1), 103-122. DOI: https://doi.org/10.2308/ajpt-52087
  6. Nasir, N., Ali, M., & Ahmed, K. (2019). Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia. Accounting Research Journal, vol. 32, issue 3, 514-531. DOI: https://doi.org/10.1108/ARJ-02-2018-0024
  7. Shan, Y. G., Graves, C., & Ali, H. H. (2013). Effect of board composition and ownership characteristics on fraud: Evidence from Malaysian listed companies. South East Asia Research, 21(2), 323–342. DOI: https://doi.org/10.5367/sear.2013.0149
  8. Berezinets, I. V., Ilyina, Y. B., & Cherkasskaya, A. D. (2013). Board structure and financial performance of Russian open joint stock companies. Bulletin of St. Petersburg University. Management, (2), 52.
  9. Raiting Forbes [Internet]. Available from: https://www.forbes.com/best-countries-for-business/list/#tab:overall
  10. Fedotov, P. V., & Murar, V. I. (2014). Management of state blocks of shares in Russia. Bulletin of Eurasian Science, (5 (24)), 31.
  11. Nikitchanova, E. V., Lihacheva, N. G., & Gulayev , K. A. (2013). Corporate governance practice in Russia: what has changed over the year? Results of the annual survey by the Russian Institute of Directors. Management Sciences, (1 (6)), 14-23.
  12. The Federal Laws. The Federation Council of the Federal Assembly of the Russian Federation (2020)
  13. Inya, P., Psaros, J., & Seamer, M. (2017). The Relevance of Western Corporate Governance in Mitigating Management Misconduct in Thailand. Emerging Markets Finance and Trade., 54. 10.1080/1540496X.2017.1307102. DOI: https://doi.org/10.1080/1540496X.2017.1307102
  14. Labelle, R., Thornton, D., He, L., & Piot , C. (2009). Board Monitoring, Audit Committee Effectiveness, and Financial Reporting Quality: Review and Synthesis of Empirical Evidence. Journal of Forensic & investigative Accounting., 1.
  15. Pucheta-Martínez, M. C., & García-Meca, E. (2014). Institutional Investors on Boards and Audit Committees and Their Effects on Financial Reporting Quality. Corporate Governance: An International Review, 22. 10.1111/corg.12070. DOI: https://doi.org/10.1111/corg.12070
  16. Oba, V., Musa, I., & Fodio, M. (2012). Board Characteristics and the Quality of Environmental Reporting in Nigeria. The Journal of Accounting and Management.
  17. Johl, S., Johl, S., Subramaniam, N., & Cooper, B. (2013). Internal audit function, board quality and financial reporting quality: Evidence from Malaysia. Managerial Auditing Journal, 28. 10.1108/MAJ-06-2013-0886. DOI: https://doi.org/10.1108/MAJ-06-2013-0886
  18. Beasley, M. (1996). An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud. The Accounting Review, 71(4), 443-465., from http://www.jstor.org/stable/248566.
  19. Ghafoor, A., Zainudin, R., & Mahdzan, N. (2019). Factors Eliciting Corporate Fraud in Emerging Markets: Case of Firms Subject to Enforcement Actions in Malaysia. Journal of Business Ethics, 160. DOI: https://doi.org/10.1007/s10551-018-3877-3
  20. Ghannam, S., Bugeja, M., Matolcsy, Z., & Spiropoul, H. (2019). Are qualified and experienced outside directors willing to join fraudulent firms and if so, why? Accounting Review, 94 (2), 205-227. DOI: https://doi.org/10.2308/accr-52195
  21. The review of corporate governance in Russian public companies in 2019. Central Bank of Russia (2020).
  22. Aglamazova, V. (2012). The concept of fiduciary relationships and the possibility of its application in the corporate law of Russia. Business Law. The app "Business and Law in Russia and za rubezhom”, – N 1., 23-29.
  23. Coles, J., Daniel, N., & Naveen, L. (2008). Boards: Does one size fit all. Journal of Financial Economics, 87, issue 2, 329-356. DOI: https://doi.org/10.1016/j.jfineco.2006.08.008
  24. Al-Matari, E., & Mgammal, M. (2019). The moderating effect of internal audit on the relationship between corporate governance mechanisms and corporate performance among Saudi Arabia listed companies. Contaduría y Administración, 65. 1-36. 10.22201/fca.24488410e.202. DOI: https://doi.org/10.22201/fca.24488410e.2020.2316
  25. Uzun , H., Szewczyk, S., & Varma, R. (2004). Board Composition and Corporate Fraud. Financial Analysts Journal., 60. 10.2469/faj.v60.n3.2619. DOI: https://doi.org/10.2469/faj.v60.n3.2619
  26. Luo, J.-h., Peng, C., & Zhang, X. (2020). The impact of CFO gender on corporate fraud: Evidence from China. Pacific-Basin Finance Journal, Elsevier, vol. 63(C). DOI: https://doi.org/10.1016/j.pacfin.2020.101404
  27. Wahid, A. (2019). The Effects and the Mechanisms of Board Gender Diversity: Evidence from Financial Manipulation. Journal of Business Ethics, 159. 10.1007/s10551-018-3785-6. DOI: https://doi.org/10.1007/s10551-018-3785-6
  28. Liao, J., Smith, D., & Liu, X. (2019). Female CFOs and accounting fraud: Evidence from China. Pacific Basin Finance Journal, 53, 449-463. DOI: https://doi.org/10.1016/j.pacfin.2019.01.003
  29. Liao, L., Chen, G., & Zheng, D. (2019). Corporate Social Responsibility and Financial Fraud: Evidence from China. Accounting & Finance, Vol. 59, Issue 5, 3133-3169. DOI: https://doi.org/10.1111/acfi.12572
  30. Sandhu, N. (2020). Behavioral red flags of fraud: a gender-based ex post analysis. Journal of Financial Crime, Vol. 27 No. 4, pp. 1307-1322. https://doi.org/10.1108/JFC-04-2020-0048. DOI: https://doi.org/10.1108/JFC-04-2020-0048
  31. Lee, A.-R., & Chávez, K. (2020). Are Women More Averse to Corruption than Men? The Case of South Korea. Social Science Quarterly, 101 (2), 473-489. DOI: https://doi.org/10.1111/ssqu.12768
  32. Hilliard, T., & Neidermeyer, P. (2018). The gendering of fraud: an international investigation. Journal of Financial Crime, 25 (3), 811-837. DOI: https://doi.org/10.1108/JFC-08-2017-0074
  33. Aguilera, R., Filatotchev, I., Gospel, H., & Jackson, G. (2008). An organizational approach to comparative corporate governance: Costs, contingencies, and complementarities. Organization Science, 19(3), 475- 4 92. DOI: https://doi.org/10.1287/orsc.1070.0322
  34. Buck, T., Filatotchev, I., Nolan, P., & Wright, M. (2000). Different path to economic reform in Russia and China: causes and consequences. Journal of World Business, 35(4), 379- 400. DOI: https://doi.org/10.1016/S1090-9516(00)00044-4
  35. Avci, S. B., Schipani, C. A., & and Seyhun, N. (2018). Do Independent Directors Curb Financial Fraud? The Evidence and Proposals for Further Reform. Indiana Law Journal, Vol. 93: Iss. 3, Article 5.
  36. Wall, J., & Gissel, J. (2019). Board of Directors' Sanction Judgments: The Effect of Situational Factors. Journal of Managerial Issues.
  37. Corporate Governance Code. The Central Bank of the Russian Federation.
  38. Shan, Y. G. (2019). Managerial ownership, board independence and firm performance. Accounting Research Journal, 32(2), 203. DOI: https://doi.org/10.1108/ARJ-09-2017-0149
  39. On the admission of securities to organized securities. Regulation of the Bank of Russia dated February 24, 2016 N 534-P. (as amended on June 27, 2019).

Қосымша файлдар

Қосымша файлдар
Әрекет
1. JATS XML
Жүктеу

© Soboleva O., Makeeva E., Aslanyan G., 2024

Creative Commons License
Бұл мақала лицензия бойынша қол жетімді Creative Commons Attribution-NonCommercial 4.0 International License.