Thi Van Le

Type of the article: Research Article

Abstract
Financial statement fraud (FSF) continues to undermine investor confidence, particularly in emerging markets where governance enforcement remains uneven. This study examines how Fraud Triangle factors influence FSF and whether earnings management strengthens these relationships in Vietnam. Using a two-step system GMM regression on 138 listed non-financial firms over 2019–2022 to address potential endogeneity concerns, the results show that financial distress significantly increases fraud risk. Firm performance is also positively associated with fraud, implying that pressure to maintain good results may contribute to misreporting. State ownership and foreign ownership are both negatively associated with FSF, indicating that monitoring by these shareholders constrains fraudulent behavior. Industry characteristics proxied by receivables intensity are positively related to fraud, suggesting greater opportunity for manipulation in revenue-related accounts. In contrast, liquidity and auditor reputation do not exhibit statistically significant effects, suggesting that external audit prestige alone may be insufficient to constrain fraudulent reporting in transitional regulatory environments. Importantly, earnings management is positively associated with FSF and significantly strengthens the impact of financial distress on fraud, indicating that discretionary accruals amplify the translation of financial pressure into misreporting. These findings point to the importance of improving financial management, enhancing transparency, and strengthening regulatory oversight to reduce fraud risk and support more effective detection by policymakers, auditors, and investors.

Acknowledgment(s)
This research is funded by the University of Economics and Law, Vietnam National University Ho Chi Minh City/VNU-HCM