The influence of corporate governance and voluntary ethics disclosure on fraudulent financial reporting during the COVID-19 pandemic

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Effective governance is crucial in enhancing public and investor trust by ensuring that the financial statements issued by banks are accurate. This is achieved through the implementation of active anti-fraud measures in relation to voluntary ethical disclosures and financial reporting. This study aims to examine the impact of corporate governance and voluntary ethical disclosure on financial reporting in the banking sector in Indonesia during the COVID-19 pandemic. The study uses a quantitative approach focusing on a panel study of 120 banks listed on the Indonesia Stock Exchange from 2019 to 2022, with particular attention to the pandemic period. The main focus of this study includes various aspects of corporate governance, such as independent audit committees, audit committee members’ qualifications, meeting attendance, audit committee and board of commissioners’ size, audit committee independence, directors’ independence, and internal audit effectiveness. The results show that Committee Meeting Frequency, Audit Committee Size, and Independent Director Board influence voluntary ethical disclosure, as well as Independent Audit Committee, Audit Committee Meeting Frequency, Audit Committee Size, Commissioner Board Size, Independent Director Board, and Internal Audit Effectiveness in mitigating financial statement fraud. Quantitatively, increased audit committee effectiveness and board independence raise voluntary ethical disclosures by 15%, while simultaneously reducing fraudulent financial reporting by 12%. Furthermore, banks with stronger corporate governance mechanisms demonstrate higher-quality financial reporting than those with weaker governance structures.

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    • Table 1. Definition of variables (proxies), symbols, and expected signs
    • Table 2. Descriptive statistics for variables
    • Table 3. Classical assumption test
    • Table 4. Hypothes test result
    • Conceptualization
      Helmi Yazid, Iis Ismawati, Dirvi Surya Abbas, Lili Sugeng Wiyantoro
    • Funding acquisition
      Helmi Yazid
    • Methodology
      Helmi Yazid, Iis Ismawati, Dirvi Surya Abbas
    • Project administration
      Helmi Yazid, Iis Ismawati
    • Supervision
      Helmi Yazid, Iis Ismawati, Dirvi Surya Abbas, Lili Sugeng Wiyantoro
    • Validation
      Helmi Yazid, Iis Ismawati, Dirvi Surya Abbas
    • Formal Analysis
      Dirvi Surya Abbas, Lili Sugeng Wiyantoro
    • Investigation
      Dirvi Surya Abbas, Lili Sugeng Wiyantoro
    • Software
      Dirvi Surya Abbas, Lili Sugeng Wiyantoro
    • Writing – review & editing
      Dirvi Surya Abbas
    • Data curation
      Lili Sugeng Wiyantoro
    • Resources
      Lili Sugeng Wiyantoro
    • Visualization
      Lili Sugeng Wiyantoro
    • Writing – original draft
      Lili Sugeng Wiyantoro