The effect of financial performance targets and financial stability on financial report fraud practices with independent commissioners as moderating variables (Empirical study on companies’ sector consumer goods industry period 2018 - 2022)

https://doi.org/10.35912/gabs.v1i1.3575
Published: Oct 16, 2024

Abstract:

Purpose: This study examines the influence of setting financial performance targets and the condition of a company's financial stability on financial statement fraud practices, with the presence of an independent board of commissioners as a moderating variable.

Research Methodology: A quantitative approach was applied using secondary data from 33 firms, yielding 165 observations. Panel data regression and Moderated Regression Analysis (MRA) with EViews software were used to test the hypotheses.

Results: The findings show that financial performance targets and financial stability do not significantly affect financial statement fraud. The independent board of commissioners cannot moderate these relationships. However, independent commissioners have a significant negative effect, helping to reduce fraudulent practices.

Conclusions: The study concludes that financial targets and stability are not decisive in fraud practices, while independent commissioners play a preventive role but not as moderating variables.

Limitations: The scope is limited to consumer goods companies, profitability indicators, and the 2018–2022 period, without considering the broader external factors.

Contribution: This study provides empirical evidence for corporate governance studies in Indonesia and highlights the importance of strengthening the role of independent commissioners to enhance oversight and reduce fraud risk.

Keywords:
1. Financial Performance Targets
2. Financial Stability
3. Financial Statement Fraud
4. Independent Board of Commissioners
Authors:
1 . Arif Darmawan Suwardi
Budi Luhur University, Indonesia
2 . Sugeng Riyadi
Budi Luhur University, Indonesia
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How to Cite
Suwardi, A. D. ., & Riyadi, S. . (2024). The effect of financial performance targets and financial stability on financial report fraud practices with independent commissioners as moderating variables (Empirical study on companies’ sector consumer goods industry period 2018 - 2022). Global Academy of Business Studies, 1(1), 71–92. https://doi.org/10.35912/gabs.v1i1.3575
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Issue & Section
Vol. 1 No. 1 (2024): July
Articles
References

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    Agus Tri Basuki, P. (2017). Analisis Regresi Dalam Penelitian Ekonomi & Bisnis: Dilengkapi Aplikasi SPSS & EVIEWS. Depok: PT Rajagrafindo Persada.

    Ahmed, M. A., & Rozario, K. P. (2024). Impact of off-balance sheet activities on bank profitability: Evidence from Bangladesh. International Journal of Financial, Accounting, and Management, 6(2), 283-299. doi:https://doi.org/10.35912/ijfam.v6i2.2510

    Andalia, A., Amiruddin, A., & Pontoh, G. T. (2021). Analysis of Factors Affecting Fraudulent Financial Reporting with Independent Commissioners as Moderation Variable. Accounting and Finance Review, 5(4), 1-12. doi:https://doi.org/10.35609/afr.2021.5.4(1)

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    Emalia, D., Midiastuty, P. P., Suranta, E., & Indriani, R. (2020). Dampak dari auditor quality, financial stability, dan financial target terhadap fraudulent financial reporting. Studi Ilmu Manajemen dan Organisasi, 1(1), 1-11. doi:https://doi.org/10.35912/simo.v1i1.21

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    Nurimansjah, R. A. (2023). Dynamics of Human Resource Management: Integrating Technology, Sustainability, and Adaptability in the Modern Organizational Landscape. Golden Ratio of Mapping Idea and Literature Format, 3(2), 120-139. doi:https://doi.org/10.52970/grmilf.v3i2.324

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    Sachdeva, C., Grover, V., Kaur, P., & Gangwar, V. P. (2024). Regulatory Landscapes: Navigating Compliance in the Commercialization of Basic Science Unleashing the Power of Basic Science in Business (pp. 118-137): IGI Global.

    Said, J., Alam, M., Ramli, M., & Rafidi, M. (2017). Integrating ethical values into fraud triangle theory in assessing employee fraud: Evidence from the Malaysian banking industry. Journal of International Studies, 10(2). doi:https://doi:10.14254/2071-8330.2017/10-2/13

    Sihombing, P. H. i., & SM, G. (2022). Pengaruh Stabilitas Keuangan Dan Tekanan Eksternal Terhadap Kecurangan Laporan Keuangan.

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  1. Abbas, D., & Siregar, I. G. (2021). Integrity of financial statements and the factors. Journal of accounting science, 5(1), 17-27. doi:https://doi.org/10.21070/jas.v5i1.1108
  2. Agus Tri Basuki, P. (2017). Analisis Regresi Dalam Penelitian Ekonomi & Bisnis: Dilengkapi Aplikasi SPSS & EVIEWS. Depok: PT Rajagrafindo Persada.
  3. Ahmed, M. A., & Rozario, K. P. (2024). Impact of off-balance sheet activities on bank profitability: Evidence from Bangladesh. International Journal of Financial, Accounting, and Management, 6(2), 283-299. doi:https://doi.org/10.35912/ijfam.v6i2.2510
  4. Andalia, A., Amiruddin, A., & Pontoh, G. T. (2021). Analysis of Factors Affecting Fraudulent Financial Reporting with Independent Commissioners as Moderation Variable. Accounting and Finance Review, 5(4), 1-12. doi:https://doi.org/10.35609/afr.2021.5.4(1)
  5. Arifin, J. (2017). SPSS 24 untuk Penelitian dan Skripsi: Elex Media Komputindo.
  6. Ateeq, A., & Alqaidoom, M. (2024). The Impact of Integrity: Navigating Ethical Dilemmas, Conflicts, and Fraud in Contemporary Business. In E. AlDhaen, A. Braganza, A. Hamdan, & W. Chen (Eds.), Business Sustainability with Artificial Intelligence (AI): Challenges and Opportunities: Volume 2 (pp. 295-302). Cham: Springer Nature Switzerland.
  7. Dechow, P. M., Ge, W., Larson, C. R., & Sloan, R. G. (2011). Predicting material accounting misstatements. Contemporary accounting research, 28(1), 17-82. doi:https://doi.org/10.1111/j.1911-3846.2010.01041.x
  8. Efunniyi, C. P., Abhulimen, A. O., Obiki-Osafiele, A. N., Osundare, O. S., Agu, E. E., & Adeniran, I. A. (2024). Strengthening corporate governance and financial compliance: Enhancing accountability and transparency. Finance & Accounting Research Journal, 6(8), 1597-1616. doi:https://DOI:10.51594/farj.v6i8.1509
  9. Emalia, D., Midiastuty, P. P., Suranta, E., & Indriani, R. (2020). Dampak dari auditor quality, financial stability, dan financial target terhadap fraudulent financial reporting. Studi Ilmu Manajemen dan Organisasi, 1(1), 1-11. doi:https://doi.org/10.35912/simo.v1i1.21
  10. Examiners, A. o. C. F. (2016). Survai Fraud Indonesia 2016.
  11. Ghozali, I. (2016). Aplikasi analisis multivariete dengan program IBM SPSS 23.
  12. Herlambang, D. R., & Nurbaiti, A. (2023). Pengaruh Intellectual Capital, Komite Audit, Komisaris Independen Terhadap Integritas Laporan Keuangan.
  13. Himawan, F. A., & Karjono, A. (2019). Analisis Pengaruh Financial Stability, Ineffective Monitoring dan Rationalization Terhadap Integritas Laporan Keuangan dalam Perspektif Fraud Triangle Pada Perusahaan Manufaktur yang Terdapat di Bursa Efek Indonesia Periode 2012-2016. Jurnal Manajemen Bisnis, 22(2), 162-188. doi:https://doi.org/10.36080/jak.v13i1.2700
  14. Jao, R., Mardiana, A., Holly, A., & Chandra, E. (2021). Pengaruh financial target dan financial stability terhadap financial statement fraud. YUME: Journal of Management, 4(1). doi:https://DOI:10.37531/yum.v11.76
  15. Lee, E. S. T., & Yazdanifard, R. (2015). How the Adaptation of Evolving Technology can cope with the ever changing Demand of Consumers? Journal of Research in Marketing (ISSN: 2292-9355), 4(2), 310-314. doi:https://doi.org/10.17722/jorm.v4i2.662
  16. Manzoor, S. R., Ullah, H., Hussain, M., & Ahmad, Z. M. (2011). Effect of teamwork on employee performance. International Journal of Learning and Development, 1(1), 110-126.
  17. Maryadi, A. D., Midiastuty, P. P., Suranta, E., & Robiansyah, A. (2020). Pengaruh fraud pentagon dalam mendeteksi fraudulent financial reporting. Jurnal Akuntansi, Keuangan, dan Manajemen, 2(1), 13-25. doi:https://doi.org/10.35912/jakman.v2i1.104
  18. Meckling, W. H., & Jensen, M. C. (1976). Theory of the Firm. Managerial Behavior, Agency Costs and Ownership Structure.
  19. Mumpuni, P. Y., & Firman, A. F. (2021). Important Factors on Make or Buy Strategy for Margin Improvement on Consumer Goods Company. International Journal of Current Science Research and Review, 4(12), 1770-1775. doi:https://doi.org/10.47191/ijcsrr/v4-i12-21
  20. Nuraini, R. I. (2019). The effect of financial stability, external pressure, and ineffective monitoring of fraudulent financial statement. Paper presented at the 1st International Conference on Applied Economics and Social Science (ICAESS 2019).
  21. Nurbaiti, A., & Elisabet, C. (2023). The Integrity Of Financial Statements: Firm Size, Independent Commissioners, And Auditor Industry Specializations. Jurnal Akuntansi, 27(1), 1-18. doi:https://doi.org/10.24912/ja.v27i1.1086
  22. Nurimansjah, R. A. (2023). Dynamics of Human Resource Management: Integrating Technology, Sustainability, and Adaptability in the Modern Organizational Landscape. Golden Ratio of Mapping Idea and Literature Format, 3(2), 120-139. doi:https://doi.org/10.52970/grmilf.v3i2.324
  23. Pratami, Y., Syaifora, L., Basriani, A., & Yuliza, M. (2021). The Role Of The Independent Commissioner In Moderating CEO Power On Company Performance. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(4). doi:https://doi.org/10.29040/ijebar.v5i4.3726
  24. Pratiya, M. A. M., Susetyo, B., & Mubarok, A. (2018). Pengaruh stabilitas keuangan, target keuangan tingkat kinerja, rasio perputaran aset, keahlian keuangan komite audit, dan profitabilitas terhadap fraudulent financial statement. Permana: Jurnal Perpajakan, Manajemen, Dan Akuntansi, 10(1).
  25. Reskino, R., & Anshori, M. F. (2016). Model pendeteksian kecurangan laporan keuangan oleh auditor spesialis industri dengan analisis fraud triangle. Jurnal Akuntansi Multiparadigma, 7(2), 256-269. doi:https://dx.doi.org/10.18202/jamal.2016.08.7020
  26. Rifa, D., & Tasrif, S. M. (2022). The effect of financial stability, financial targets and rationalization on financial statements fraud. Journal of Contemporary Accounting, 169-178. doi:https://doi.org/10.20885/jca.vol4.iss3.art4
  27. Sachdeva, C., Grover, V., Kaur, P., & Gangwar, V. P. (2024). Regulatory Landscapes: Navigating Compliance in the Commercialization of Basic Science Unleashing the Power of Basic Science in Business (pp. 118-137): IGI Global.
  28. Said, J., Alam, M., Ramli, M., & Rafidi, M. (2017). Integrating ethical values into fraud triangle theory in assessing employee fraud: Evidence from the Malaysian banking industry. Journal of International Studies, 10(2). doi:https://doi:10.14254/2071-8330.2017/10-2/13
  29. Sihombing, P. H. i., & SM, G. (2022). Pengaruh Stabilitas Keuangan Dan Tekanan Eksternal Terhadap Kecurangan Laporan Keuangan.
  30. Totong, Y. A., & Majidah. (2020). Analisis Pengaruh Mekanisme Corporate Governance, Kualitas Audit, Pergantian Auditor Dan Financial Distress Terhadap Integritas Laporan Keuangan (Studi Pada Perusahaan Subsektor Transportasi yang Terdaftar di BEI Tahun 2014- 2018).
  31. Wilkins, S., & Ireland, J. J. (2022). FMCG firms’ margin management: consumer trade-offs among product price, quantity and quality. Journal of Strategic Marketing, 30(8), 764-781. doi:https://doi.org/10.1080/0965254X.2020.1849362