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Board Members Diversity and Financial Statements Fraud: Malaysian Evidence

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State-of-the-Art Theories and Empirical Evidence

Abstract

This research investigates whether the board member diversity: gender, ethnic, and roles diversity, are associated with the likelihood of financial statement fraud. The sample of this study includes all fraud firms which has been disclosed by the Securities Commission Malaysia matched with an equal number of non-fraud firm. A total of 124 firms are included in this study, consisting 62 firms that engaged in financial statement fraud and other 62 of non-fraud firms. Using the logistic regression analysis, the findings show that financial statement fraud is positively associated with less gender diversity and roles diversity. In addition, there is a significant relationship between governance characteristics (board size, board meeting, and chairman dual role) and financial statement fraud. This study concludes that firms engaging with fraud have more frequent board meeting, is dominated by Chinese ethnicity, have high proportion of independent directors and the chairman and Chief Executives Officer (CEO) or Managing Director are the same person/director. Overall, this research contributes new evidence on the factors that explain the likelihood of financial statement fraud.

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Authors and Affiliations

  1. Faculty of Accountancy, Universiti Teknologi Mara Cawangan Kedah, Merbok, 08040, Kedah, Malaysia

    Khairul Anuar Kamarudin & Wan Adibah Wan Ismail

  2. Inland Revenue Board of Malaysia, Kuala Lumpur, Malaysia

    Airul Aezza Kamaruzzaman

Authors
  1. Khairul Anuar Kamarudin
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  2. Wan Adibah Wan Ismail
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  3. Airul Aezza Kamaruzzaman
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Corresponding author

Correspondence to Wan Adibah Wan Ismail .

Editor information

Editors and Affiliations

  1. Universiti Teknologi MARA, Kedah, Malaysia

    Roshima Said

  2. Universiti Teknologi MARA, Kedah, Malaysia

    Noor Zahirah Mohd Sidek

  3. Universiti Sains Malaysia, Penang, Malaysia

    Zubir Azhar

  4. Universiti Teknologi MARA, Kedah, Malaysia

    Khairul Anuar Kamarudin

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Kamarudin, K.A., Wan Ismail, W.A., Kamaruzzaman, A.A. (2018). Board Members Diversity and Financial Statements Fraud: Malaysian Evidence. In: Said, R., Mohd Sidek, N., Azhar, Z., Anuar Kamarudin, K. (eds) State-of-the-Art Theories and Empirical Evidence. Springer, Singapore. https://doi.org/10.1007/978-981-10-6926-0_10

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