FINANCIAL STATEMENT FRAUD AND FIRM PERFORMANCE: EMPIRICAL EVIDENCE FROM INDONESIA
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Abstract
Fraudulent financial reporting is an intentional misstatement of the financial
statements, which is the incorrect representation intentionally used to manipulate
the decision of stakeholders by ensuring that they make their decision based on
incorrect information. This study examines factors affecting the likelihood of
financial statement fraud occurrences and differences between fraudulent and nonfraudulent companies listed in Indonesia Stock Exchange with respect to the
company’s profitability over the period 2010 to 2018. Empirical results indicate
that the ratio of current assets to total assets, long-term debt to total equity, total
sales to total equity, and the cost of goods sold to sales have significant impact on
affecting the likelihood of financial statement fraud. Based on the propensity score
matching using cross-sectional data, the study finds that profitability has no
significant difference between fraudulent and non-fraudulent companies
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