Factors Influencing Financial Statement Fraud: An Analysis of the Fraud Diamond Theory from Evidence of Thai Listed Companies

Abstract

Since stakeholders of listed companies rely on the financial statement. However, prior studies pointed out that financial statement fraud is a significant cause of fraud among Thai-listed companies. This increases the risk for stakeholders’ decision-making. Thus, this study initially examines empirical evidence regarding financial statement fraud in line with the Fraud Diamond Theory in Thailand. It proposes to reflect factors of financial statement fraud that exist. The objectives of this study were 1) to analyze the factors of the Fraud Diamond Theory that influence financial statement frauds of listed companies in Thailand 2) to examine the effects of the Fraud Diamond Theory factors on the financial statements of listed companies in Thailand, and 3) to study the relationship between moderator variables, namely the size of the company and the risks of the industry, and the factors of the Fraud Diamond Theory influencing the financial statement fraud of listed companies on the Stock Exchange of Thailand. There were ten independent variables examined as factors influencing financial statement fraud. The independent variables were classified into four categories, pressure, opportunity, rationalization, and capability. This study applied a quantitative research approach. Secondary data were collected from 371 listed companies on the Stock Exchange of Thailand during the 2015–2020 period. There were 1,855 observations in total. The research used descriptive statistics and logistic regression analysis to prove the research hypotheses. The results revealed that 11.48 percent of the samples had a high probability of financial statement fraud. External pressures such as financial targets (ROA), rationalizations such as accrual (ACCRUAL), and the moderator variable, industry risk (IND), influenced the financial statement fraud on the Stock Exchange of Thailand at a statistical significance level of 0.05. On the other hand, the other eight independent variables and the moderator variable, the size of the enterprise, had no significant influence on financial statements fraud on the Stock Exchange of Thailand.