Corporate Governance and Misappropriation

28 Pages Posted: 7 Sep 2007

See all articles by Larelle Law Chapple

Larelle Law Chapple

QUT School of Business; Financial Research Network (FIRN)

Colin Ferguson

University of Melbourne - Faculty of Business and Economics (Deceased)

Diana Kang

affiliation not provided to SSRN

Date Written: June 15, 2007

Abstract

This study examines the occurrence of misappropriation-type fraud within Australian listed firms and the relation between the incidence of this type of fraud and a firm's governance strength. We measure governance strength using factors relating to traditional corporate governance, such as board composition, CEO duality, and audit committee composition, as well as factors relating to information technology governance. In our study, we use actual dollar amount of fraud reported by listed companies responding to the 2004 KPMG Fraud Survey as one of three different misappropriation measures and publicly available firm-specific data to measure the other variables in the model. Our study found that where the chief executive officer (CEO) also holds the position of chairperson of the board of directors, the likelihood of fraud increases. We also find that the greater the number of independent directors on the audit committee, the lower the level of fraud. Taken together, these results are particularly encouraging as they provide support for regulatory bodies such as the Australian Stock Exchange (ASX) and the Australian Securities and Investment Commission (ASIC), which place considerable emphasis on the importance of establishing good corporate governance practices. The study provides empirical evidence that employing good corporate governance reduces the risk of the misappropriation of assets.

Keywords: Fraud, Misappropriation, Corporate Governance, Board Structure, Audit committees

Suggested Citation

Law Chapple, Larelle and Ferguson, Colin and Kang, Diana, Corporate Governance and Misappropriation (June 15, 2007). Available at SSRN: https://ssrn.com/abstract=1011936 or http://dx.doi.org/10.2139/ssrn.1011936

Larelle Law Chapple

QUT School of Business ( email )

GPO Box 2434
Brisbane, Queensland 4001
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Colin Ferguson (Contact Author)

University of Melbourne - Faculty of Business and Economics (Deceased)

Diana Kang

affiliation not provided to SSRN ( email )

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
434
Abstract Views
2,117
rank
68,120
PlumX Metrics