DO BOARD ATTRIBUTES MATTER? INVESTIGATING THEIR INFLUENCE ON FRAUDULENT FINANCIAL REPORTING: A STUDY OF NON-FINANCIAL FIRMS IN PAKISTAN

Abstract

Financial reporting is important, as it provides information about the company upon which investors rely and make investment decisions. The accuracy of such reporting is mandatory to protect investors and keep the firm away from fraudulent practices. This study aims to unveil the influence of board attributes on fraudulent financial reporting in non-financial firms in Pakistan. The study considers board attributes like board size, independence, and diversity as independent variables while fraudulent financial reporting proxied by the Beinish model as a dependent variable. Using various tests, the study findings proclaim that board attributes (board size, board independence, board diversity) significantly influence fraudulent financial reporting in non-financial firms. A well-structured board with diverse perspectives, independent oversight, and an appropriate size can act as a strong deterrent to fraudulent activities. Larger boards provide comprehensive and effective monitoring, while board independence ensures that decisions are made impartially, reducing the likelihood of manipulation. Furthermore, diversity in the boardroom also encourages varied viewpoints, resulting in more appropriate and accurate decisions. For investors, this insight is crucial as it highlights that strong governance structures specifically board attributes can protect their investments by minimizing risks associated with fraudulent practices.

Keywords: Board size, Board Independence, Board Diversity, Fraudulent practices, Non-Financial Firms