The Effect of Intellectual Capital on Financial Statement Fraud in Manufacturing Companies Listed on Indonesia Stock Exchange 2018-2022

Nurul Qalbi Awaliyah, Siti Mutmainah

Abstract


Financial statement fraud is the rarest but most detrimental fraud. This type of fraud is growing and becoming more complicated than before due to technological developments. The massive use of technology increases dependence on intellectual assets so that these assets are predicted to minimize the potential for financial statement fraud. This study aims to examine whether intellectual capital negatively affects the probability of financial statement fraud. 105 observations from 30 manufacturing companies listed on the Indonesia Stock Exchange in 2018-2022 were sampled through purposive sampling techniques. Data was analyzed using descriptive statistics and panel data analysis processed with Eviews version 12. The results showed that only relational capital had an effect in reducing the possibility of financial statement fraud while structural capital had no effect. Human capital is known to be able to increase the possibility of financial statement fraud. This findings contributes to the need to consider intellectual capital in investigating financial statement fraud and other type of fraud.


Keywords


Financial Statement Fraud; Intellectual Capital; Human Capital; Structural Capital; Relational Capital

Full Text:

PDF

References


ACFE. (2018). Report to The Nations: 2018 Global Study on Occupational Fraud and Abuse.

ACFE. (2020). Report to The Nations: 2020 Global Study on Occupational Fraud and Abuse.

ACFE. (2022). Occupational Fraud 2022: A Report To The Nations.

Akhter, F., Hossain, M. R., Omrane, A., & Kabir, M. R. (2022). Impact of Corporate Attributes on Human Resource Disclosure Practices, Evidences from Commercial Banks of Bangladesh. FIIB Business Review, 11(3), 303–314. https://doi.org/10.1177/23197145211039343

Andrikopoulos, A. (2005). The real-options approach to intellectual capital analysis: A critique. Knowledge and Process Management, 12(3), 217–224. https://doi.org/10.1002/kpm.230

Aviantara, R. (2023). Scoring the financial distress and the financial statement fraud of Garuda Indonesia with «DDCC» as the financial solutions. Journal of Modelling in Management, 18(1), 1–16. https://doi.org/10.1108/JM2-01-2020-0017

Ballester, M., Garcia-Ayuso, M., & Livnat, J. (2003). The economic value of the R&D intangible asset. European Accounting Review, 12(4), 605–633. https://doi.org/10.1080/09638180310001628437

Bataineh, H., Abbadi, S. S., Alabood, E., & Alkurdi, A. (2022). The effect of intellectual capital on firm performance: the mediating role of family management. Journal of Islamic Accounting and Business Research, 13(5), 845–863. https://doi.org/10.1108/JIABR-02-2022-0032

Bontis, N. (1998). Intellectual capital: an exploratory study that develops measures and models. Management Decision, 36(2), 63–76.

Bontis, N. (2001). Assessing knowledge assets: a review of the models used to measure intellectual capital. International Journal of Management Reviews, 3(1), 41–60.

Bontis, N., & Fitz-enz, J. (2002). Intellectual capital ROI: A causal map of human capital antecedents and consequents. Journal of Intellectual Capital, 3(3), 223–247. https://doi.org/10.1108/14691930210435589

Bontis, N., William Chua Chong, K., & Richardson, S. (2000). Intellectual capital and business performance in Malaysian industries. Journal of Intellectual Capital, 1(1), 85–100. https://doi.org/10.1108/14691930010324188

Castro, J. P. G., Ramírez, D. F. D., & Escobar, J. M. (2021). The relationship between intellectual capital and financial performance in Colombian listed banking entities. Asia Pacific Management Review, 26(4), 237–247. https://doi.org/10.1016/j.apmrv.2021.03.002

Chan, K. H. (2009). Impact of intellectual capital on organisational performance: An empirical study of companies in the Hang Seng Index (Part 2). Learning Organization, 16(1), 22–39. https://doi.org/10.1108/09696470910927650

Chen, M. C., Cheng, S. J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2), 159–176. https://doi.org/10.1108/14691930510592771

Choong, K. K. (2008). Intellectual capital: Definitions, categorization and reporting models. Journal of Intellectual Capital, 9(4), 609–638. https://doi.org/10.1108/14691930810913186

Clarke, M., Seng, D., & Whiting, R. H. (2011). Intellectual capital and firm performance in Australia. Journal of Intellectual Capital, 12(4), 505–530. https://doi.org/10.1108/14691931111181706

Demetriades, P., & Owusu-Agyei, S. (2022). Fraudulent financial reporting: an application of fraud diamond to Toshiba’s accounting scandal. Journal of Financial Crime, 29(2), 729–763. https://doi.org/10.1108/JFC-05-2021-0108

EY. (2018). 15th Global Fraud Survey, Integrity in The Spotlight: The future of compliance.

Fitri, F. A., Syukur, M., & Justisa, G. (2019). Do The Fraud Triangle Components Motivate Fraud In Indonesia? Australasian Accounting, Business, and Finance Journal, 13(4), 63–72.

Ikbal, M., Irwansyah, I., Paminto, A., Ulfah, Y., & Darma, D. C. (2020). Explores the specific context of financial statement fraud based on empirical from indonesia. Universal Journal of Accounting and Finance, 8(2), 29–40. https://doi.org/10.13189/ujaf.2020.080201

Jardon, C. M., & Martinez-Cobas, X. (2021). Measuring intellectual capital with financial data. PLoS ONE, 16(5 May). https://doi.org/10.1371/journal.pone.0249989

Jaswadi, J., Purnomo, H., & Sumiadji, S. (2022). Financial statement fraud in Indonesia: a longitudinal study of financial misstatement in the pre- and post-establishment of financial services authority. Journal of Financial Reporting and Accounting.

https://doi.org/10.1108/JFRA-10-2021-0336

Lestari, E. B. (2017). The Factors Affecting Tendency Of Fraud In Government Sector. Finance, and Forensic Accounting, 5(2), 67–76. http://jaffa.trunojoyo.ac.id/jaffa

Li, X., Nosheen, S., Haq, N. U., & Gao, X. (2021). Value creation during fourth industrial revolution: Use of intellectual capital by most innovative companies of the world. Technological Forecasting and Social Change, 163. https://doi.org/10.1016/j.techfore.2020.120479

Lotfi, A., Salehi, M., & Lari Dashtbayaz, M. (2021). The effect of intellectual capital on fraud in financial statements. TQM Journal. https://doi.org/10.1108/TQM-11-2020-0257

Luo, J. hui, Peng, C., & Zhang, X. (2020). The impact of CFO gender on corporate fraud: Evidence from China. Pacific-Basin Finance Journal, 63, 101404. https://doi.org/10.1016/J.PACFIN.2020.101404

Luo, X., Griffith, D. A., Liu, S. S., & Shi, Y.-Z. (2004). The Effects of Customer Relationships and Social Capital on Firm Performance: A Chinese Business Illustration. In Source: Journal of International Marketing (Vol. 12, Issue 4).

Martini, B. S., Corvino, A., Doni, F., & Rigolini, A. (2016). Relational capital disclosure, corporate reporting and company performance: Evidence from Europe. Journal of Intellectual Capital, 17(2), 186–217. https://doi.org/10.1108/JIC-07-2015-0065

Mouritsen, J., Nikolaj Bukh, P., & Marr, B. (2004). Reporting on intellectual capital: Why, what and how? Measuring Business Excellence, 8(1), 46–54. https://doi.org/10.1108/13683040410524739

Nasir, N. A., Ali, M. J., & Ahmed, K. (2019). Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia. Accounting Research Journal, 32(3), 514–531. https://doi.org/10.1108/ARJ-02-2018-0024

Nasir, N. A., Ali, M. J., Razzaque, R. M. R., & Ahmed, K. (2018). Real earnings management and financial statement fraud: evidence from Malaysia. International Journal of Accounting and Information Management, 26(4), 508–526. https://doi.org/10.1108/IJAIM-03-2017-0039

Nasir, N. A., & Hashim, H. A. (2020). Corporate governance performance and financial statement fraud: evidence from Malaysia. Journal of Financial Crime, 28(3), 797–809. https://doi.org/10.1108/JFC-09-2020-0182

Nazari, J. A., & Herremans, I. M. (2007). Extended VAIC model: Measuring intellectual capital components. Journal of Intellectual Capital, 8(4), 595–609. https://doi.org/10.1108/14691930710830774

Ni, Y., Cheng, Y. R., & Huang, P. (2020). Do intellectual capitals matter to firm value enhancement? Evidences from Taiwan. Journal of Intellectual Capital, 22(4), 725–743. https://doi.org/10.1108/JIC-10-2019-0235

Nurcholisah, K., & Yadiati, W. (2017). Intellectual Capital Disclosure and Information Asymmetry in General Banking Listed in Indonesia Stock Exchange. International Business Management, 11(4), 972–983.

Nuryaman, Kartadjumena, E., & Gusnandar Arnan, S. (2019). The influence of intellectual capital on earnings management through real activities manipulation in Indonesian manufacturing companies. International Journal of Economics and Business Research, 18(3), 277–291.

Olarewaju, O. M., & Msomi, T. S. (2021). Intellectual capital and financial performance of South African development community’s general insurance companies. Heliyon, 7(4), e06712. https://doi.org/10.1016/J.HELIYON.2021.E06712

Owusu, G. M. Y., Koomson, T. A. A., Alipoe, S. A., & Kani, Y. A. (2021). Examining the predictors of fraud in state-owned enterprises: an application of the fraud triangle theory. Journal of Money Laundering Control. https://doi.org/10.1108/JMLC-05-2021-0053

Rastogi, P. N. (2003). The nature and role of IC:Rethinking the process of value creation and sustained enterprise growth. Journal of Intellectual Capital, 4(2), 227–248. https://doi.org/10.1108/14691930310472848

Rezaee, Z., & Riley, R. (2010). Financial Statement Fraud: Prevention and Detection (second edition). John Wiley & Sons, Inc.

Rostami, V., & Rezaei, L. (2022). Corporate governance and fraudulent financial reporting. Journal of Financial Crime, 29(3), 1009–1026. https://doi.org/10.1108/JFC-07-2021-0160

Sa Ânchez, P., Chaminade, C., & Olea, M. (2000). Management of intangibles An attempt to build a theory. Journal of Intellectual Capital, 1(4), 1469–1930. http://www.emerald-library.com

Salehi, M., Ali Mohammed Al-Msafir, H., Homayoun, S., & Zimon, G. (2022). The effect of social and intellectual capital on fraud and money laundering in Iraq. Journal of Money Laundering Control. https://doi.org/10.1108/JMLC-12-2021-0142

Shiu, H.-J. (2006). The Application of the Value Added Intellectual Coefficient to Measure Corporate Performance: Evidence from Technological Firms. International Journal of Management, 23(2), 356.

Singleton, T. W., & Singleton, A. J. (2010). Fraud Auditing and Forensic Accounting (Fourth Edition). John Wiley & Sons, Inc.

Smriti, N., & Das, N. (2018). The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935–964. https://doi.org/10.1108/JIC-11-2017-0156

Sydler, R., Haefliger, S., & Pruksa, R. (2014). Measuring intellectual capital with financial figures: Can we predict firm profitability? European Management Journal, 32(2), 244–259. https://doi.org/10.1016/j.emj.2013.01.008

Ur Rehman, A., Aslam, E., & Iqbal, A. (2022). Intellectual capital efficiency and bank performance: Evidence from islamic banks. Borsa Istanbul Review, 22(1), 113–121. https://doi.org/10.1016/j.bir.2021.02.004

Vishnu, S., & Gupta, V. K. (2014). Intellectual capital and performance of pharmaceutical firms in India. Journal of Intellectual Capital, 15(1), 83–99. https://doi.org/10.1108/JIC-04-2013-0049

Wahyuningtyas, E. T., & Aisyaturrahmi. (2021). The incidence of accounting fraud is increasing: is it a matter of the gender of chief financial officers? Journal of Financial Crime. https://doi.org/10.1108/JFC-10-2021-0230

Wang, Y., Yu, M., & Gao, S. (2022). Gender diversity and financial statement fraud. Journal of Accounting and Public Policy, 41(2). https://doi.org/10.1016/j.jaccpubpol.2021.106903

Weqar, F., Sofi, Z. A., & Haque, S. M. I. (2020). Nexus between intellectual capital and business performance: evidence from India. Asian Journal of Accounting Research, 6(2), 180–195. https://doi.org/10.1108/AJAR-07-2020-0064

Wicaksono, A. P., & Urumsah, D. (2017). Factors Influencing Employees To Commit Fraud In Workplace Empirical Study In Indonesian Hospitals. Asia Pacific Fraud Journal, 1(1), 1. https://doi.org/10.21532/apfj.001.16.01.01.01

Xu, J., & Liu, F. (2020). The impact of intellectual capital on firm performance: A modified and extended vaic model. Journal of Competitiveness, 12(1), 161–176. https://doi.org/10.7441/joc.2020.01.10

Zéghal, D., & Maaloul, A. (2010). Analysing value added as an indicator of intellectual capital and its consequences on company performance. Journal of Intellectual Capital, 11(1), 39–60. https://doi.org/10.1108/14691931011013325

Zheng, Q., Luo, Y., & Wang, S. L. (2014). Moral Degradation, Business Ethics, and Corporate Social Responsibility in a Transitional Economy. Journal of Business Ethics, 120(3), 405–421. https://doi.org/10.1007/s10551-013-1668-4




DOI: https://doi.org/10.26905/ap.v9i2.10917

Refbacks

  • There are currently no refbacks.


 

Indexing by

 

width="150"

Garuda - Garba Rujukan Digital

 

Index of /public/site/images/septi

Index Copernicus International (ICI)

 Tools:

 

Turnitin

crossref

Mendeley

 

Supported By:

 

Universitas Merdeka Malang

 


JURNAL AKUNTANSI DAN PERPAJAKAN

Fakultas Ekonomi dan Bisnis
Universitas Merdeka Malang

Mailing Address:

Jalan Terusan Raya Dieng 62-64 Malang
East Java, Indonesia
Phone: 085855234000
Email: akuntansi.pajak@unmer.ac.id

 

Copyright ©2021 University of Merdeka Malang Powered by Open Journal Systems.