The Effect of Fraud Heptagon Theory on Fraudulent Financial Statements with Managerial Ownership As A Moderating Variable
DOI:
https://doi.org/10.23917/reaksi.v11i1.16505Keywords:
Fraudulent Financial Statements, Fraud Heptagon Theory, Agency Theory, Managerial Ownership, Moderated Regression AnalysisAbstract
This study examines the effect of Fraud Heptagon elements (Pressure, Opportunity, Rationalization, Capability, Arrogance, Ignorance, and Greed) on fraudulent financial statements, with managerial ownership as a moderating variable. Financial reporting fraud remains a critical issue due to agency conflicts and weaknesses in corporate governance mechanisms. This research aims to provide empirical evidence on how structural, psychological, and governance-related factors influence financial statement manipulation. The sample was selected using purposive sampling, and based on these criteria, 16 companies were selected, resulting in 128 units of analysis. The study employs panel data regression analysis and Moderated Regression Analysis (MRA), with model selection determined through the Hausman test. The results indicate that Pressure, Opportunity, Rationalization, Capability, Arrogance, and Ignorance have a significant positive effect on fraudulent financial statements, while Greed does not have a significant influence. Furthermore, managerial ownership moderates several relationships by weakening the effects of Pressure, Opportunity, and Arrogance. These findings support Fraud Heptagon Theory and Agency Theory and highlight the importance of strengthening corporate governance mechanisms to mitigate financial reporting fraud risk.
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