Fraudulent financial reporting and firm value: An empirical analysis from the fraud hexagon perspective
-
Author(s)Amiruddin JunusLink to ORCID Index: https://orcid.org/0000-0001-6730-6360
,
Sri SundariLink to ORCID Index: https://orcid.org/0000-0002-4773-1746
,
Siti Zakina AzzahraLink to ORCID Index: https://orcid.org/0009-0002-9146-817X
-
DOIhttp://dx.doi.org/10.21511/imfi.22(1).2025.26
-
Article InfoVolume 22 2025, Issue #1, pp. 339-350
- 97 Views
-
44 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Indonesia’s mining sector was ranked as the third most vulnerable to fraud according to the Association of Certified Fraud Examiners (ACFE) survey in 2019. The advent of the COVID-19 pandemic further contributed to a 26.6% decline in sector investment in 2020 due to widespread project cancellations. Thus, this study analyzes fraudulent financial reporting and firm value from the perspective of fraud hexagon and firm size focusing on the mining sector industry in Indonesia. The panel data regression analysis was used to analyze data collected from the annual reports of mining companies in Indonesia from 2020 to 2022. The findings indicate that management pressure proxied by financial targets and measured through Return on Assets (ROA) has an effect on fraudulent financial reporting (FFR), as measured by F-Score. In addition, opportunities proxied by nature of industry affect FFR negatively. FFR also affects the value of a company as proxied by Tobin’s Q ratio. These results suggest that mining companies should set financial targets cautiously to avoid excessive pressure on management and uphold strong governance and control systems. Moreover, this study highlights the importance of raising awareness of fraudulent financial reporting, given its potentially adverse effects on a company’s going concern.
- Keywords
-
JEL Classification (Paper profile tab)G32, M41
-
References60
-
Tables3
-
Figures0
-
- Table 1. Independent variable indicators
- Table 2. Panel data regression 1 test results
- Table 3. Panel data regression 2 test results
-
- ACFE. (2019). The Report of National ACFE, Jakarta: ACFE Indonesia Chapter.
- ACFE. (2020). Report to the Nations: 2020 Global Study on Occupational Fraud and Abuse, USA: Association of Certified Fraud Examiners, Inc.
- Agung, A., Pranyanita, I., Mediatrix, M., & Sari, R. (2021). Determinants of Financial Statement Fraud Using the Fraud Hexagon Model. Research Journal of Finance and Accounting, 12(23), 18-25.
- Agusputri, H., & Sofie, S. (2019). Faktor-Faktor Yang Berpengaruh Terhadap Fraudulent Financial Reporting Dengan Menggunakan Analisis Fraud Pentagon [Factors That Affect Fraudulent Financial Reporting Using Fraud Pentagon Analysis]. Jurnal Informasi, Perpajakan, Akuntansi, Dan Keuangan Publik, 14(2), 105-124. (In Indonesian).
- Apriada, K., & Suardikha, M. S. (2016). Pengaruh Struktur Kepemilikan Saham, Struktur Modal dan Profitabilitas pada Nilai Perusahaan [Effect of Share Ownership Structure, Capital Structure and Profitability on Firm Value]. E-Jurnal Ekonomi dan Bisnis Universitas Udayana, 5(2), 201-218. (In Indonesian).
- Aprilia, R., Syarifuddin, S., & Haerial, H. (2022). Analisis Kecurangan Laporan Keuangan melalui Fraud Hexagon [Financial Statement Fraud Analysis through the Fraud Hexagon]. Akrual: Jurnal Bisnis dan Akuntansi Kontemporer, 15(2), 143-151. (In Indonesian).
- Bierstaker, J. L., Brody, R. G., & Pacini, C. (2006). Accountants’ Perceptions Regarding Fraud Detection and Prevention Methods. Managerial Auditing Journal, 21(5), 520-535.
- Beasley, M. S. (1996). An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud. The Accounting Review, 71(4), 443-465.
- Bhaktiar, R. E., & Awalia Setyorini. (2021). The Effect of the Fraud Triangle on Fraud Financial Statements (Case Study on Manufacturing Companies in the Food and Beverage Subsector). Jurnal Mantik, 5(2), 841-847.
- Dechow, P., Ge, W., Larson, C., & Sloan, R. (2007). Predicting Material Accounting Manipulations. Contemporary Accounting Research, 28(1), 17-82.
- Elviani, D., Ali, S., & Kurniawan, R. (2020). Pengaruh kecurangan laporan keuangan terhadap nilai perusahaan: Ditinjau dari perspektif fraud pentagon (Kasus di Indonesia) [The effect of financial statement fraud on firm value: Viewed from the perspective of fraud pentagon (Case in Indonesia)]. Jurnal Ilmiah Universitas Batanghari Jambi, 20(1), 121-125. (In Indonesian).
- Felli, L., & Vallve, R. H. (2015). Collusion, blackmail, and whistle-blowing (CESifo Working Paper Series No. 5343).
- Ghozali, I. (2018). Aplikasi Analisis Multivariate dengan Program IBM SPSS 25. Semarang: Universitas Diponegoro.
- Gillies, D. (2014). Human capital, education, and sustainability. SISYPHUS Journal of Education, 2(3), 78-99.
- Habib, A., Muhammadi, A. H., & Jiang, H. (2017). Political Connections and Related Party Transactions: Evidence from Indonesia. The International Journal of Accounting, 52, 45-63.
- Hadi, M. S. W., Kirana, D. J., Wijayanti, A. (2021). Pendeteksian Fraudulent Financial Reporting dengan Fraud Hexagon pada Perusahaan di Indonesia [Detection of Fraudulent Financial Reporting with the Fraud Hexagon in Companies in Indonesia]. In Prosiding BIEMA (Business Management, Economic, and Accounting National Seminar). (In Indonesian).
- Handoko, B. L., & Ramadhani, K. A. (2017). Pengaruh Karakteristik Komite Audit, Keahlian Keuangan dan Ukuran Perusahaan terhadap Kemungkinan Kecurangan Laporan Keuangan [The Influence of Audit Committee Characteristics, Financial Expertise, and Firm size toward the Possibility of Financial Report Fraud]. Development Research of Management, 12(1), 86-113. (In Indonesian).
- Hartadi, B. (2022). Pengaruh Fraud Hexagon terhadap Fraudulent Financial Statements pada Perusahaan Badan Usaha Milik Negara Indonesia yang Terdaftar di Bei pada Tahun 2018-2021 [The Effect of Fraud Hexagon on Fraudulent Financial Statements in Indonesian State-Owned Enterprises Listed on Bei in 2018-2021]. Jurnal Pendidikan Tambusai, 6(2), 14883-14896. (In Indonesian).
- Himawan, F. A., & Wijanarti, R. S. (2020). Analisis Pengaruh Fraud Pentagon terhadap Pendeteksian Kecurangan Laporan Keuangan pada Perusahaan Manufaktur yang terdaftar di BEI Tahun 2014- 2018 [Analysis of the Influence of the Fraud Pentagon on the Detection of Financial Statement Fraud in Manufacturing Companies listed on the IDX in 2014-2018]. ESENSI: Jurnal Manajemen Bisnis, 23(2), 137-154.
- Hirdinis, M. (2019). Capital Structure and Firm Size on Firm Value Moderated by Profitability. International Journal of Economics and Business Administration, 7(1), 174-191.
- Holtfreter, K. (2008). Determinants of Fraud Losses in Nonprofit Organizations. Nonprofit Management & Leadership, 19(1), 45-63.
- Horwath, C. (2011). Putting the Freud in Fraud: Why the Fraud Triangle is No Longer Enough, Horwath, Crowe.
- Harsono, N. (2021). Energy and mining investments in Indonesia fall to 5-year record low in 2020.
- Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Cost and Ownership Structure. Journal of Financial Economics, 3(4), 305-306.
- Kartikawati, T. S., Mahyus, M., & Zulfikar, Z. (2020). Pengaruh Fraud Pentagon dalam Mendeteksi Fraudulent Financial Reporting Menggunakan Beneish Model serta Implikasinya terhadap Nilai Perusahaan [The Effect of Fraud Pentagon in Detecting Fraudulent Financial Reporting Using the Beneish Model and Its Implications for Firm Value]. Jurnal Eksos, 16(1), 20-36. (In Indonesian).
- Khan, A. S., Nejad, M. Y., & Kassim, A. A. M. (2023). The Effect of Audit Quality on Fraud Reduction: A Moderating Role of International Financial Reporting Standards (IFRS) Adoption in Malaysia and Indonesia. International Journal of Professional Business Review, 8(6), 01-21.
- Kumalasari, L. (2023). Determinan Kecurangan Laporan Keuangan Berbasis Fraud Hexagon Theory Dan Implikasinya Terhadap Nilai Perusahaan [Determinants of Financial Statement Fraud Based on Fraud Hexagon Theory and Its Implications for Firm Value] (Thesis). Universitas Islam Indonesia. (In Indonesian).
- Manurung & Wildan. (2023). Pengaruh Struktur Modal Dan Ukuran Perusahaan Terhadap Nilai Perusahaan Studi Kasus Pada Perusahan Sektor Makanan Dan Minuman Yang Terdaftar Di BEI Periode 2016-2020 [The Effect of Capital Structure and Firm size on Firm Value Case Study of Food and Beverage Sector Companies Listed in the IDX for the 2016-2020 Period]. Jurnal Ilmiah Manajemen Kesatuan, 11(1), 83-90. (In Indonesian).
- Matoussi, H., & Gharbi, I. (2011). Board Independence and Corporate Fraud the Case of Tunisian Firms (Working Paper 620).
- Maulina, N. S., & Meini, Z. (2023). Pengaruh Fraud Hexagon Terhadap Fraudulent Financial Statement [The Influence of Fraud Hexagon On Fraudulent Financial Statement]. Jurnal Akuntansi Universitas Jember, 21(2), 97-111. (In Indonesian).
- Messier, W. F., Glover, S. M., & Prawitt, D. F. (2017). Auditing and Assurance Services: A Systematic Approach Tenth Edition. New York: McGraw-Hill Education.
- Mohamed Yusof, K., Ahmad, Khair, A.H., & Simon Jon. (2015). Fraudulent Financial Reporting: An Application of Fraud Models to Malaysian Public Listed Companies. The Macrotheme Review, 4(3), 126-145.
- Mukaromah, I., & Budiwitjaksono, G. S. (2021). Fraud Hexagon Theory dalam Mendeteksi Kecurangan Laporan Keuangan pada Perbankan yang Terdaftar di Bursa Efek Indonesia Tahun 2015-2019 [Fraud Hexagon Theory in Detecting Financial Statement Fraud in Banks Listed on the Indonesia Stock Exchange 2015-2019]. Kompak: Jurnal Ilmiah Komputerisasi Akuntansi, 14(1), 61-72. (In Indonesian).
- Novarina, D., & Triyanto, D. N. (2022). Pengaruh Fraud Hexagon Terhadap Kecurangan Laporan Keuangan Pada Perusahaan LQ 45 Yang Terdaftar di Bursa Efek Indonesia Periode 2016-2020 [The Effect of Fraud Hexagon on Financial Statement Fraud in LQ 45 Companies Listed on the Indonesia Stock Exchange for the 2016-2020 Period]. Jurnal Akuntansi dan Keuangan, 10(2), 183-196. (In Indonesian).
- Nugroho, D. S., & Diyanty, V. (2022). Hexagon fraud in fraudulent financial statements: The moderating role of Audit Committee. Jurnal Akuntansi Dan Keuangan Indonesia, 19(1), 3.
- Permatasari, D., & Laila, U. (2021). Deteksi Kecurangan Laporan Keuangan dengan Analisis Fraud Diamond di Perusahaan Manufaktur [Detection of Financial Statement Fraud with Fraud Diamond Analysis in Manufacturing Companies]. Akuntabilitas, 15(2), 241-262. (In Indonesian).
- Rukmana, H. S. (2018). Determinan Fraud Diamond dalam Mendeteksi Financial Statement Fraud dan Nilai Perusahaan [Fraud Diamond Determinants in Detecting Financial Statements Fraud and Firm Value]. ECONOMICUS, 12(1), 12-25. (In Indonesian).
- Salvatore, D. (2005). Ekonomi Manajerial dalam Perekonomian Global [Managerial Economics in a Global Economy]. Jakarta: Salemba Empat. (In Indonesian).
- Sari, E. J., Adam, M., & Tjandrakirana, R. (2019). The Influence of Audit Rotation, Audit Tenure and Workload on Audit Quality at Consumer Goods Sector Manufacturing Companies listed in Indonesia Stock Exchange, Eurasia: Economics & Business, 3(21), 67-76.
- Sari, S. P., & Witosari, D. (2022). Fraud Financial Statement Detection: Fraud Hexagon Model Analysis in the Financial Sector Listed on the Indonesia Stock Exchange. In The 4th International Conference on Business and Banking Innovations (ICOBBI) 2022 (pp. 45-55).
- Setiawan, K., & Trisnawati, I. (2022). Factors that affect Fraudulent Financial Reporting. Media Bisnis, 14(2), 189-208.
- Setyono, D., Hariyanto, E., Wahyuni, S., & Pratama, B. C. (2023). Penggunaan fraud hexagon dalam mendeteksi kecurangan laporan keuangan [The use of fraud hexagon in detecting financial statement fraud]. Owner: Riset dan Jurnal Akuntansi, 7(2), 1036-1048. (In Indonesian).
- Sihombing, T., & Panggulu, G. E. (2022). Fraud Hexagon Theory and Fraudulent Financial Statement in IT Industry in Asean. Jurnal Reviu Akuntansi Dan Keuangan, 12(3), 524-544.
- Singleton, T. W., & Singleton, A. J. (2010). Fraud Auditing and Forensic Accounting. (4th ed.). New Jersey: John Wiley & Sons, Inc.
- Siswantoro, S. (2020). Pengaruh faktor tekanan dan ukuran perusahaan terhadap kecurangan laporan keuangan [The influence of pressure factors and firm size on financial statement fraud]. Jurnal Akuntansi, Keuangan, Dan Manajemen, 1(4), 287-300. (In Indonesian).
- Skousen, C. J., & Twedt, B. J. (2009). Fraud Score Analysis in Emerging Markets. Cross Cultural Management: An International Journal, 6(3), 301-316.
- Skousen, C. J., Smith, K. R., & Wright, C. J. (2008). Detecting and Predicting Financial Statement Fraud: The Effectiveness of the Fraud Triangle and SAS No. 99.
- Smith, K. J., Emerson, D. J., & Mauldin, S. (2021). Online cheating at the intersection of the dark triad and fraud diamond. Journal of Accounting Education, 57, 100753.
- Sudrajat, S., Suryadnyana, N.A., & Supriadi, T. (2023). Fraud Hexagon: Detection of Fraud of Financial Report in State-owned Enterprises in Indonesia. Jurnal Tata Kelola dan Akuntabilitas Keuangan Negara, 9(1), 87-102.
- Sujoko, K., & Soebiantoro, U. (2007). Pengaruh Struktur Kepemilikan Saham, Leverage, Faktor Interen dan Faktor Eksteren terhadap Nilai Perusahan [Effect of Shareholding Structure, Leverage, Internal and External Factors Against Company Value]. Jurnal Manajemen dan Kewirausahaan, 9(1), 41-48. (In Indonesian).
- Summers, S. L., & Sweeney, J. T. (1998). Fraudulently Misstated Financial Statements and Insider Trading: An Empirical Analysis. The Accounting Review, 73(1), 131-46.
- Syamsuddin, S., Islahuddin, I., & Diantimala, Y. (2023). Corporate Governance, Quality of Financial Statements, Firm Size, and Financial Stability on Fraudulent Financial Reporting on Listed Indonesia Stock Exchange Banking Institutions. International Journal of Social Health, 2(8), 555-561.
- Syamsudin, S., Imronudin, I., Utomo, S. T., & Praswati, A. N. (2017). Corporate Governance in Detecting Lack of Financial Report. Journal of Management Dynamics, 8(2), 167-176.
- Triyanto, D. N. (2019). Fraudulence Financial Statements Analysis using Pentagon Fraud Approach. Journal of Accounting Auditing and Business, 2(2), 26-36.
- Ulfah, M., Nuraina, E., & Wijaya, A.L. (2017). Pengaruh Fraud Pentagon dalam Mendeteksi Fraudulent Financial Reporting (Studi Empiris pada Perbankan yang Terdaftar di BEI) [The Effect of Fraud Pentagon in Detecting Fraudulent Financial Reporting (Empirical Study on Banks Listed on the IDX)]. The 9th FIPA: Forum Ilmiah Pendidikan Akuntansi Universitas PGRI Madiun, 5(1), 399-418. (In Indonesian).
- Ushad, S. A., & Ramen, M. (2017). Usage and Perceptions of Fraud Detection and Preventive Methods: Evidence from Mauritius. Revista Internacional Administracion & Finanzas, 9(1), 87-96.
- Utami, I., S. Wijono, S. Noviyanti, & Mohamed, N. (2019). Fraud diamond, Machiavellianism, and fraud intention. International Journal of Ethics and Systems, 35(4), 531-544.
- Vousinas, G. L. (2019). Advancing theory of fraud: the S.C.O.R.E. model. Journal of Financial Crime, 26(1), 372-381.
- Wicaksari, E. A., Widia, S., & Putri, V. W. (2023). The Diamond Fraud Theory For Property And Real Estate To Detect Financial Report Fraud. Management Analysis Journal, 12(2), 114-156.
- Yanti, D. D., & Munari, M. (2021). Analisis Fraud Pentagon terhadap Kecurangan Laporan Keuangan Pada Sektor Perusahaan Manufaktur [Pentagon Fraud Analysis of Financial Statement Fraud in the Manufacturing Company Sector]. Akuisisi: Jurnal Akuntansi, 17(1), 31-46. (In Indonesian).
-
Inventory management, cost of capital and firm performance: evidence from manufacturing firms in Jordan
Ashraf Mohammad Salem Alrjoub ,
Muhannad Akram Ahmad
doi: http://dx.doi.org/10.21511/imfi.14(3).2017.01
Investment Management and Financial Innovations Volume 14, 2017 Issue #3 pp. 4-14 Views: 2974 Downloads: 2123 TO CITE АНОТАЦІЯSeveral studies have examined the relationship between inventory management and firm performance. However, most of these studies ignore the impact of inventory types on the relationship. Moreover, the relationship is influenced by some factors such as cost of capital which has not been considered. This study examines the moderating effect of cost of capital on the relationship between inventory types and firm performance. The data of 48 firms for the period 2010-2016 which formed 279 firm-year observations were used in this study. With the use of Pearson correlation and panel Generalized Method of Moments (GMM) estimation, the findings show that inventory management with consideration of its types influence firm performance in the long term. In addition, it is also found that cost of capital moderates the relationship between inventory management and firm performance. However, the interaction between cost of capital and inventory types has different implications. It is suggested that firms should consider cost of capital when making decision on inventory types and align their inventory control to fit in to the changes in their business environment.
-
The impact of foreign ownership on corporate governance: evidence from an emerging market
Rawan Shubita , Moade Fawzi Shubita
doi: http://dx.doi.org/10.21511/imfi.16(2).2019.09
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 101-115 Views: 2167 Downloads: 343 TO CITE АНОТАЦІЯThis research explores the influence of foreign ownership on non-financial public shareholding firms in the Amman Stock Exchange (ASE). The study involved an investigation into the connection between non-Jordanian ownership and the company growth opportunity, stock liquidity, leverage, dividend policy and business output. The results highlight that foreign ownership can provide improved corporate governance practices by playing a decisive role in increasing the growth opportunity and enhancing the firms’ market valuation, as measured by Tobin’s Q. Moreover, the findings indicate that companies with foreign board membership have better operating performance and higher firm value. The rewards were reaped by foreign investors based on their superior monitoring ability, which affects the decisions made and actions taken by management.
-
Does capital structure affect firm value in Vietnam?
Tien Dat Dang , Thi Van Trang Do
doi: http://dx.doi.org/10.21511/imfi.18(1).2021.03
Investment Management and Financial Innovations Volume 18, 2021 Issue #1 pp. 33-41 Views: 2147 Downloads: 1214 TO CITE АНОТАЦІЯThis study aims to examine whether the capital structure and several factors have significant influences on firm value in Vietnam. To achieve this objective, 435 non-financial listed companies have been selected from 2012 to 2019 on Vietnamese stock exchanges. Four groups of firms continue to be chosen from the total to investigate the differences in the outcomes among industries. The results altogether using the GMM method show that the impact of capital structure and other control variables on firm value is significant, yet different across industries: capital structure has a significant positive impact on firm value in the food and beverage industry, but has a significant negative effect on the value of the firm in wholesale trade and construction, as well as real estate industry, while has an insignificant influence on enterprise value considering all industries. Apart from the firm size, the impact of other control factors on firm value also indicates mixed results.
