Article Details
Vol. 5 No. 4 (2026): April
Corporate Governance and Fraudulent Reporting in Indonesia and Malaysia
This study analyzes the effectiveness of corporate governance in mitigating fraudulent financial reporting (FFR) in Indonesia and Malaysia. Using a quantitative approach, the research examines public companies from 2014–2023 that had experienced cases or indications of financial problems. A bivariate probit regression is applied to panel data to evaluate the impact of governance mechanisms on FFR, bankruptcy potential, and earnings manipulation, while controlling for year and sector effects. Results show clear contrasts between the two countries. In Indonesia, potential fraud was identified in 49% of firms, bankruptcy in 88.67%, and earnings manipulation in 55%. In Malaysia, the potential for fraud was significantly higher at 82%, with similar bankruptcy levels (88.67%) and substantially higher earnings manipulation (88.15%). These differences suggest that Indonesian governance mechanisms are relatively more effective, whereas Malaysia’s formally strong governance framework exhibits limited practical enforcement in distressed firms. The study highlights that contextual factors such as regulatory strength and ownership concentration are more influential than formal compliance, emphasizing the importance of internalizing integrity rather than adding structural governance layers.
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