PRESSURE AND FINANCIAL STATEMENT FRAUD IN THE BANKING INDUSTRY: THE MODERATING ROLE OF PROFIT EQUALIZATION
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Abstract
Fraudulent financial statement remains a critical concern in the banking industry, given its systemic implications for investor confidence and financial stability. Grounded in fraud triangle theory, this study examines the effect of pressure on fraudulent financial statement with income smoothing as a moderating variable in Indonesian listed banks. Using a balanced panel dataset of 48 banks over the period 2022-2024 (144 observations), this study employs Panel Estimated Generalized Least Squares (EGLS) with cross-section weights and Fixed Effect Model. The findings reveal that financial stability positively and significantly influences fraudulent financial statements, while external pressure shows no significant effect. Income smoothing significantly moderates both relationships, attenuating the effect of financial stability and external pressure on fraudulent financial statements. These results extend fraud triangle theory by demonstrating that the relevance of pressure proxies is industry-contingent and that income smoothing functions as a substitutive mechanism rather than a complement to fraudulent reporting. Practically, the findings underscore the importance of asset-growth-based early warning systems for regulators and reinforce the need for stronger governance mechanisms in high-growth banking institutions.
Keywords:
Fraudulent Financial Statement Pressure Income Smoothing F-Score, Banking IndustryReferences
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