Impact of manager’s motivation on fraudulent accounting: An empirical study

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Abstract

This study empirically examines the motives of Indian firms’ managers to violate Generally Accepted Accounting Principles (GAAP) and engage in so-called fraudulent accounting. Managers’ motivations for fraudulent accounting rather than profit adjustment are empirically analyzed using data from Indian-listed companies. The sample includes 91 firms and the period of study is March 2001 to March 2022. The tests were conducted using single and multiple variables by the empirical methods used in other studies on profit adjustment. In the case of single variables, the tests are the chi-square test of independence for dummy variables and the significance test of the difference between the mean and median for continuous variables. In the case of multiple variables, the sample firms with a dependent variable of 1 and the control firms with a dependent variable of 0 are analyzed using the logit model. The estimation is done by the robust covariance method. The findings indicate that firms that engage in fraudulent accounting are significantly worse off than other firms in terms of their financial position and operating results, have significantly higher financing needs, and significantly more frequently conduct initial public offerings (IPOs).

Keywords: Fraudulent Accounting, Profit Adjustment, Motivation/Pressure, Financing Needs, Initial Public Offerings

Authors’ individual contribution: Conceptualization — A.A.A. and H.A.; Methodology — H.K. and A.K.; Software — A.I.; Validation — S.B.; Formal Analysis — A.K.; Investigation — S.B.; Resources — I.A.K.; Data Curation — S.B.; Writing — Original Draft — I.A.K.; Writing — Review & Editing — I.A.K.; Visualization — H.K.; Supervision — A.A.A. and H.A.; Project Administration — A.I.

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

JEL Classification: J24, M40, M41, M42

Received: 15.09.2023
Accepted: 05.04.2024
Published online: 10.04.2024

How to cite this paper: Alakkas, A. A., Alhumoudi, H., Khan, H., Imam, A., Khatoon, A., Bashir, S., & Khan, I. A. (2024). Impact of manager’s motivation on fraudulent accounting: An empirical study. Corporate Governance and Organizational Behavior Review, 8(2), 93–102. https://doi.org/10.22495/cgobrv8i2p9