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ASEAN Journal on Science and Technology for Development

Abstract

The increasing incidence of corporate fraud in major global companies has drawn significant scrutiny to the effectiveness of corporate governance in mitigating such fraudulent activities. Despite substantial improvements in corporate governance practices and the implementation of new regulatory frameworks aimed at curbing corporate fraud, instances of fraud continue to rise. If this situation persists, it will become a serious impediment to making substantial progress toward the 2030 Agenda for Sustainable Development. The objective of this study is to explore the interplay between corporate governance attributes, whistleblowing policies, and the likelihood of corporate fraud occurrences within the context of Malaysia. The research sample comprises 19 companies implicated in fraudulent activities, as documented in the Malaysian Securities Commission Enforcement Action for either criminal prosecution or civil action. Additionally, 19 non-fraudulent companies listed on Bursa Malaysia were included for comparative analysis. Data collection spans the period from 1999 to 2019, allowing for a comprehensive assessment. The data was analyzed using panel logistic regression techniques. The study's findings reveal several critical insights into the relationships between corporate governance, whistleblowing policies, and corporate fraud in Malaysia. The size of a company's board of directors plays a significant role in influencing the likelihood of corporate fraud occurrences. Compensation structures for directors also exhibit a statistically significant relationship with corporate fraud incidents. The level of financial expertise within a company's audit committee is linked to the occurrence of corporate fraud. Specifically, the financial expertise of the audit committee chairman demonstrates a noteworthy connection to corporate fraud likelihood. The presence and effectiveness of a whistleblowing policy are important determinants in mitigating corporate fraud incidents. These findings hold vital implications for various stakeholders, including publicly traded companies, auditors, and policymakers. They underscore the importance of formulating and advancing robust corporate governance structures, regulatory frameworks, and institutional environments to address the persistent challenge of corporate fraud effectively. As corporate fraud remains a pressing concern, this study provides valuable insights that can inform strategic decisions and policy enhancements in the realm of corporate governance, ultimately contributing to more effective fraud prevention and mitigation efforts in Malaysia.

Keywords

Corporate fraud, corporate governance, whistleblowing policy, panel logistic regression

Publication Date

2024

Received Date

23-Oct-2023

Revised Date

2-Jan-2024

Accepted Date

28-Feb-2024

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