Firm Characteristics and Fraudulent Financial Reporting: An Application of the M-Score Model in Nigeria and Kenya
Abstract
The study examined the impact of firm characteristics on fraudulent financial reporting in Nigeria and Kenya. The objective of the study was to examine the impact of firm size, leverage, institutional ownership and firm profitability on fraudulent reporting. The population of the study comprised of quoted non-financial companies in the Stock Exchange and Nairobi Stock Exchange for the period of 2012 to 2018. The data collected were analysed using descriptive statistics, correlation and robust least square regression analysis. It was observed from the descriptive statistics that there is presence of fraudulent financial reporting among the quoted non-financial companies in Nigeria and Kenya. The regression results revealed that the firm size was statistically insignificant; leverage was statistically significant, institutional ownership was statistically insignificant in Nigeria and firm profitability was statistically. The study recommended that shareholders and investors in Nigeria and Kenya should invest in lowly leverage firms because it high leverage firm increases the level of fraudulent financial reporting.
