Effects of corporate governance on fraud prevention. (c2016)

Abstract

Fraudulent financial reporting and dishonesty in financial statements decrease credibility in audited financial reports. Reducing fraudulent activities can be achieved by implementing compliance mechanisms such as good corporate governance practices. Recent studies concluded that corporate governance structures should be improved in developing countries, particularly in Lebanon where corporate governance is weak in terms of application. This study aims to determine fraud prevention impacted by corporate governance dimensions, transparency of financial data and ownership structures, efficiency of the board of directors, and proactive corporate social responsibility measures and audit committee initiatives .This survey-based study uses data collected from employees working in different Lebanese corporations and who are familiar with corporate governance structures and financial performances the companies. Data analysis shows that the effectiveness and independence of the board of directors followed by the audit committee effectiveness, and the transparency of financial data have the highest impact on limiting fraudulent activities.