Corporate governance and misappropriation

Chapple, Larelle June, Ferguson, Colin, & Kang, Diana (2009) Corporate governance and misappropriation. Journal of Forensic and Investigative Accounting, 1(2), pp. 1-26.

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This study examines the occurrence of misappropriation-type fraud within Australian listed firms and the relation between the incidence of this type of fraud and a firm's governance strength. We measure governance strength using factors relating to traditional corporate governance, such as board composition, CEO duality, and audit committee composition, as well as factors relating to information technology governance. In our study, we use actual dollar amount of fraud reported by listed companies responding to the 2004 KPMG Fraud Survey as one of three different misappropriation measures and publicly available firm-specific data to measure the other variables in the model. Our study found that where the chief executive officer (CEO) also holds the position of chairperson of the board of directors, the likelihood of fraud increases. We also find that the greater the number of independent directors on the audit committee, the lower the level of fraud. Taken together, these results are particularly encouraging as they provide support for regulatory bodies such as the Australian Stock Exchange (ASX) and the Australian Securities and Investment Commission (ASIC), which place considerable emphasis on the importance of establishing good corporate governance practices. The study provides empirical evidence that employing good corporate governance reduces the risk of the misappropriation of assets.

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ID Code: 50808
Item Type: Journal Article
Refereed: Yes
Keywords: Fraud; Misappropriation; Corporate Governance; Board Structure; Audit committees
ISSN: 2165-3755
Subjects: Australian and New Zealand Standard Research Classification > LAW AND LEGAL STUDIES (180000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Deposited On: 07 Jun 2012 22:30
Last Modified: 07 Jun 2012 22:30

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