CEO Capability and CEO Arrogance

Renna Magdalena; Yanuar Dananjaya

doi:10.18535/ijsrm/v9i07.em06

Abstract

This study aims to see the effect of the CEO Capabilities and CEO Arrogance to fraudulent financial statements indication. The study used a sample of all manufacturing companies from 2017 to 2019. In accordance with the sample selection, there are 162 manufacturing companies that meet the sample criteria. In this study using multiple linear regression test. This study uses secondary data for the 2017-2019 annual report.

Based on the results that have been tested, CEO capability as a respected party (CEO Age), CEO capability as the person who knows the most about the company (CEO Tenure) and CEO arrogance as a person who has political connections (CEO Political Connection) have an influence on the indication of fraudulent financial statements. Furthermore, the hypothesis of CEO Capability in Accounting/finance knowledge (CEO Education), CEO arrogance in the form of narcissism (CEO PIC) and CEO arrogance as company founder (Founder CEO) have no influence on indications of fraudulent financial statements.

Keywords

CEO CapabilityCEO ArroganceFraudulent Financial Statement

References

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Wolfe, D. T., & Hermanson, D. R. (2004). The Fraud Diamond: Considering the Four Elements of Fraud. CPA Journal, 74(12), 38–42.Google Scholar ↗

[refR-1] ACFE. (2020). Report to the nations: 2020 Global study on occupational fraud and abuse. Association of Certified Fraud Examiners. Retrieved from https://www.acfe.com/report-to-the-nations/2020/Google Scholar ↗

[refR-2] Alekseeva, N. I., Adi, A. N., Baridwan, Z., Mardiati, E., & Faculty, E. (2018). Profitability , Liquidity , Leverage and Corporate Governance Impact on Financial Statement Fraud and Financial Distress. Bulletin of Taras Shevchenko National University of Kyiv. Economics, 66–74.Google Scholar ↗

[refR-3] Apriliana, S., & Agustina, L. (2017). The Analysis of Fraudulent Financial Reporting Determinant through Fraud Pentagon Approach. Jurnal Dinamika Akuntansi, 9(2), 154–165. https://doi.org/10.15294/jda.v7i1.4036DOI ↗Google Scholar ↗

[refR-4] Christian, N., Basri, Y. Z., & Arafah, W. (2019). Analysis of Fraud Triangle , Fraud Diamond and Fraud Pentagon Theory to Detecting Corporate Fraud in Indonesia. The International Journal of Business Management and Technology, 3(4), 73–78.Google Scholar ↗

[refR-5] Cressey, D. R. (1953). Other people’s money: a study in the social psychology of embezzlement. Glencoe, IL: The Free Press.Google Scholar ↗

[refR-6] Downing, L. (2015). The Executive Fraud Triangle: The great “I.” Associaiton of Certified Fraud Examiner. Retrieved from https://www.acfe.com/article.aspx?id=4294988229Google Scholar ↗

[refR-7] Faradiza, S. A. (2019). Fraud Pentagon Dan Kecurangan Laporan Keuangan. EkBis: Jurnal Ekonomi Dan Bisnis, 2(1). https://doi.org/https://doi.org/10.14421/ekbis.2018.2.1.1060DOI ↗Google Scholar ↗

[refR-8] Hall, J. A. (2013). Accounting Information Systems (8th ed.). Mason: Cengage Learning.Google Scholar ↗

[refR-9] Hidayah, E., & Saptarini, G. D. (2019). Pentagon Fraud Analysis in Detecting Potential Financial Statement Fraud of Banking Companies in Indonesia. Proceeding of The 3 Rd International Conference on Accounting, Business & Economics (UII-ICABE 2019), (2010), 89–102.Google Scholar ↗

[refR-10] Indarto, S. L., & Ghozali, I. (2016). Fraud Diamond : Detection Analysis on The Fraudulent Financial Reporting. Risk Governance and Control: Financial Markets and Institutions, 6(4), 116–123. https://doi.org/10.22495/rcgv6i4c1art1DOI ↗Google Scholar ↗

[refR-11] Júnior, R. V., & Martins, O. S. (2019). The Influence of Corporate Governance on the Mitigation of Fraudulent Financial Reporting. Review of Business Management, 65–84. https://doi.org/10.7819/rbgn.v22i1.4039DOI ↗Google Scholar ↗

[refR-12] Marks, J. (2012). The mind behind the fraudsters crime: Key behavioral and environmental elements. ACFE Global Fraud Conference. Association of Certified Fraud Examiners.Google Scholar ↗

[refR-13] Marzuki, M. M., Haji-abdullah, N. M., Othman, R., Aswadi, E., Wahab, A., Harymawan, I., & Wahab, A. (2019). Audit Committee Characteristics, Board Diversity, and Fraudulent Financial Reporting. Asian Academy of Management Journal, 24(2), 143–167.Google Scholar ↗

[refR-14] Mohamed Yusof, K., Ahmad Khair, A. H., & Simon, J. (2015). Fraudulent Financial Reporting: An Application of Fraud Models to Malaysian Public Listed Companies. The Macrotheme Review, 4(3), 126–145.Google Scholar ↗

[refR-15] Omukaga, K. O. (2019). Is the fraud diamond perspective valid in Kenya ? Journal of Financial Crime. https://doi.org/10.1108/JFC-11-2019-0141DOI ↗Google Scholar ↗

[refR-16] Pamungkas, I. D., & Utomo, S. D. (2018). Fraudulent Financial Reporting : An Application of Fraud Pentagon Theory to Association of Southeast Asian Nations Corporate Governance Scorecard. Journal of Advanced Research in Law and Economics, IX(5), 1729–1737. https://doi.org/10.14505/jarle.v9.5(35).26.DOI ↗Google Scholar ↗

[refR-17] Rustiarini, N. W., Sutrisno, S., Nurkholis, N., & Andayani, W. (2019). Fraud triangle in public procurement : evidence from Indonesia. Journal of Financial Crime, 26(4), 951–968. https://doi.org/10.1108/JFC-11-2018-0121DOI ↗Google Scholar ↗

[refR-18] Simbolon, R., Elviani, S., Trisna, E., Simbolon, R. H. T., Safrida, & Nasution, U. (2019). The moderating effect of integrity on the relationship of triangle fraud elements and fraud: Evidence in Indonesia. International Journal of Scientific and Technology Research, 8(9), 1728–1732.Google Scholar ↗

[refR-19] Sun, J., Kent, P., Qi, B., & Wang, J. (2017). Chief financial officer demographic characteristics and fraudulent financial reporting in China. Accounting and Finance, 1–30. https://doi.org/10.1111/acfi.12286DOI ↗Google Scholar ↗

[refR-20] Triyanto, D. N. (2019). Fraudulence Financial Statements Analysis using Pentagon Fraud Approach. Journal of Accounting Auditing and Business, 2(2), 26–36.Google Scholar ↗

[refR-21] Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Englewood Cliffs: Prentice Hall, Inc.Google Scholar ↗

[refR-22] Wolfe, D. T., & Hermanson, D. R. (2004). The Fraud Diamond: Considering the Four Elements of Fraud. CPA Journal, 74(12), 38–42.Google Scholar ↗