Institutional Ownership, CEO Characteristics and the Probability of Fraud Occurrence in Firms

Ghodrat allah Taleb Nia, Maryam Bahadori , Mahjoobeh Hajalizadeh

Abstract


A lot of studies focus on market reaction to the disclosure of fraud and managers’ commitment facing financial distortions. However, it is not clear that how firms’ fraud influences decision making and polices of the firms. Most of investors and law legislators believe that some features of corporate governance help protect shareholders’ interests and reduce any conflict of interest between the shareholders and the management. This can reduce the likelihood of fraud at the firms. The aim of this study is to investigate the relationship between institutional ownership, CEO characteristics and the probability of fraudulent financial reporting of listed firms on the Stock Exchange in Tehran. The studied sample consists of 100 firms listed in Tehran Stock Exchange during the five-year period 2010 to 2014. To verify the hypotheses, multiple regression method is used. The results of testing the hypotheses show that there is a significant relationship between institutional ownership, and CEO influence and the possibility of fraudulent financial reporting in firms. However, there is no significant relationship between duality of CEO task and the risk of fraudulent financial reporting in firms.

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