Company ownership structure in leverage control as optimization of financial fraud supervision: A board of directors outlook

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Abstract

High leverage will cost the company to achieve its given targets. So, the target that is not completed will make the management meet the target by various ways, namely by financial fraud. This study aims to identify the effect of ownership structure on leverage and financial fraud. The ownership structure in this study stands for foreign, managerial, and institutional ownership. Leverage is used with debt to total asset proxies, while financial fraud uses the categorization of 0 for a non-manipulator, and 1 for a manipulator with a Beneish M-score model. This research uses manufacturing companies registered in Bursa Efek Indonesia for 2016–2020. The sample used was 40 companies with 200 observational data. The method used is purposive sampling, and SPSS software is used to analyze the data with linear regression models and path analysis. The findings showed that foreign ownership did not significantly affect leverage. Managerial and institutional ownership had a significant effect on leverage. In contrast, indirect leverage did not mediate foreign and institutional ownership against financial fraud and mediated significantly between managerial ownership and financial fraud.

Keywords: Financial Leverage, Fraud Financial, Ownership Structure, Beneish Model

Authors’ individual contributions: Conceptualization — S.T.U.; Methodology — S.T.U.; Validation — W.M.; Formal Analysis — S.T.U.; Data Curation — W.M.; Writing — Original Draft — S.T.U.; Writing — Review & Editing — W.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G3, G4, G32

Received: 11.10.2023
Accepted: 04.11.2024
Published online: 07.11.2024

How to cite this paper: Utomo, S. T., & Mawardi, W. (2024). Company ownership structure in leverage control as optimization of financial fraud supervision: A board of directors outlook. Corporate Board: Role, Duties and Composition, 20(3), 71–84. https://doi.org/10.22495/cbv20i3art7