Oksana Soboleva, Elena Makeeva and Gayane Aslanyan presented a joint research “The Influence of Corporate Governance Mechanisms on Probability of Fraud Occurrence: Evidence from Russian Companies” at the international conference EIASM

18-19 March senior lecturer Oksana Soboleva, associate professor Elena Makeeva and 2-nd year student of SCF Master's Program Gayane Aslanyan presented a joint research at the international conference European Institute of Advanced Studies in Management (EIASM) 2-nd Workshop on Fraud and Accounting Scandals.

Article title:
“The Influence of Corporate Governance Mechanisms on Probability of Fraud Occurrence: Evidence from Russian Companies”.

More information about the conference.

Abstract:

This study examines whether board and its` committees structure influence the probability that corporate fraud will occur. We investigate the role of the aforementioned variables as corporate governance mechanisms and their influence on the likelihood of fraud in the context of listed Russian companies. In particular, we evaluate the effect of gender diversity, size, the degree of independence, and the frequency of meetings for a board and its committees.

Our empirical study is based on 160 observations of MOEX-listed public Russian companies, for which fraudulent behaviour has been revealed in 32 over a 5-year period from 2014 to 2018. The relationship between the probability of fraud occurrence and corporate governance was investigated employing logit model. The data was collected from firms’ annual reports and Thomson Reuters Eikon. Data on fraud cases were collected from leading Russian news media resources.

We detected a significant negative relationship between nomination and renumeration committee chairman independence and the likelihood of fraud. We established the insignificance of board size and committees’ size and the insignificance of their meetings’ frequency on fraud probability. The share of independent directors and the independence of board and audit committee chairmen also had no influence on fraud likelihood. One more significant result is that if chairman is independent, increase in relative meetings’ frequency detection of fraudulent behaviour is more frequent than in cases where non-independent chairmen are present.

The scientific novelty of this study is our identification of key drivers to optimise corporate governance in Russia, and decrease the likelihood of fraud. Our research indicates governance effectiveness in Russia can be improved by increasing the independence of nomination and remuneration committee chairman. Since female directors’ presence on the board decreases fraud probability, our research also supports the argument for increasing gender diversity in this sphere.