Email this article Management Entrenchment and Intellectual Capital: Their Role in Driving Financial Statement Fraud in Indonesian SOEs
Abstract
This study examines the influence of management entrenchment and intellectual capital on financial statement fraud. Logistic regression analysis was conducted using 120 panel data observations from state-owned enterprises (SOEs) listed on the Indonesia Stock Exchange (IDX) between 2018 and 2023. Financial statement fraud was measured using the Beneish M-Score, and management entrenchment was evaluated based on Chief Executive Officer (CEO) tenure and managerial ownership. Intellectual capital, including human capital, structural capital, and capital employed, was measured using the Value Added Intellectual Coefficient (VAIC) method. The results demonstrate that management entrenchment, whether assessed by CEO tenure or managerial ownership, does not have a significant effect on financial statement fraud. Conversely, all components of intellectual capital are associated with fraud risk: human capital increases risk, while structural capital and capital employed decrease it. These findings indicate that management entrenchment is not the primary determinant of financial statement fraud in SOEs. Effective management of intellectual capital is crucial for mitigating this risk. The study provides important implications for regulators and policymakers by emphasizing the necessity to enhance corporate governance frameworks and encourage the ethical management of intellectual capital to minimize financial reporting errors.
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DOI: http://dx.doi.org/10.20961/jab.v25i2.1628
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