Researching the Causes of Financial Fraud in Listed Companies: A Qualitative Comparative Analysis Based On the Fraud Triangle Theory Using Fuzzy Sets

Author(s)

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Volume 12 - September 2023 (09)

Abstract

The advancement in science and technology, along with the complexity of macroeconomic circumstances, has contributed significantly to the challenge of identifying instances of corporate financial fraud. Against this backdrop, this paper explores the factors that induce companies to engage in fraudulent financial behavior. By utilizing the Fraud Triangle theory as a foundation, this analysis offers an in-depth examination from three aspects: pressure, opportunity, and rationalization. This study utilized the fsQCA (fuzzy set qualitative comparative analysis) method to investigate the configuration of factors that influence financial fraud behavior. A sample was drawn from typical cases inspected by the China Securities Regulatory Commission from 2016 to 2022. It was found that individual factors have limited influence on fraudulent behavior and cannot solely cause fraudulent activities. The five common configurations leading to fraudulent behavior are opportunity-driven, weakly supervised, individual dominant, internal-external alliances, and pressure-driven. This research is imperative for preventing and identifying instances of financial fraud.

Keywords

Publicly-traded companies; Financial fraud; Fraud Triangle Theory; fsQCA.

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Cite this Article:

Jian Cao, Researching the Causes of Financial Fraud in Listed Companies: A Qualitative Comparative Analysis Based On the Fraud Triangle Theory Using Fuzzy Sets, International Journal of Management Sciences and Business Research 09(2023):10-20 DOI: 10.5281/zenodo.8427045