The impact of behavioural factors on investment decisions in light of the informational content of fraudulent financial reports
DOI:
https://doi.org/10.31150/ajebm.v5i3.964Keywords:
information, behavioural, fraudulent, maintainAbstract
Reports and financial statements are the final product of the accounting information system that reflects the financial position of the economic entity as well as business results. These reports are supposed to provide appropriate information to many parties including investors and creditors to enable them to make decisions. Based on the information included within the financial reports, investors (current and potential) make the decision to maintain, increase, or abandon their investments, or initiate an investment decision. At this point, a number of behavioural factors emerge playing an influential role in directing investment decisions towards a certain route when relying on financial reports that involve fraud and deception, which are known as fraudulent financial reports. The idea of this study starts from selecting some behavioural factors to find out the effects that these factors have in determining the direction of the investment decision based on fraudulent financial reports. The researchers have deliberately selected (9) behavioural factors as being the most important to achieve the purposes of the research.
Downloads
References
Abdul Rahman, R. & Ali, F.H. (2006). Board, audit committee, culture and earnings management: Malaysian evidence. Managerial Auditing Journal, 21(7), 800.
Adinolfi, P. (2021). A journey around decision-making: Searching for the “big picture” across disciplines. European Management Journal, 39(1), 9-21.
Al-Imam, S. M. A. & Shehab, S. H. (2015). The effect of the investor’s behavioural factors on stock trading indicators. Journal of Management and Economy,(130).
Al-Zahrani, A. & Hamdi, A. M. (2017). Behavioural Bias among Investors. The Arab Journal of Management 37(3).
Association of Certified Fraud Examiners. (2016). Report to the nations on occupational fraud and abuse: 2016 global fraud study. Association of Certified Fraud Examiners.
Baker, M. & Wurgler, J. (2006). Investor Sentiment and the Cross-Section of Stock Returns. The Journal of Finance, 61(4),1645-1680.
Barber, BM & Odean T. (2000). Trading is dangerous to your wealth: The common stock investment performance of individual investors. Journal of Finance, 773-806.
Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. The quarterly journal of economics, 116(1), 261-292.
Beasley, M. S., Carcello,J. V. , & Hermanson, D. R. (2000). Preventing Fraudulent Financial Report. Retrieved from: http://digitalcommons.kennesaw.edu/cgi/viewcontent.cgi?article=2532&context=facpubs
Beasley, M. S., Hermanson, D. R., Carcello, J. V., & Neal, T. L. (2010). Fraudulent financial reporting: 1998-2007: An analysis of US public companies. Retrieved from: https://egrove.olemiss.edu/aicpa_assoc/453
Beattie, V., Fearnley, S. and Brandt, R. (2001). Behind Closed Doors: What Company Audit is Really About. Basingstoke: Palgrave.
Cen, L., Hilary, G., & Wei, K. J. (2013). The role of anchoring bias in the equity market: Evidence from analysts’ earnings forecasts and stock returns. Journal of Financial and Quantitative Analysis, 48(1), 47-76.
Edwards, W. (1968). Conservatism in human information processing. Cambridge: Cambridge University Press.
Festinger, L. (1957). A Theory of cognitive dissonance. Stanford, CA: Stanford University Press.
Lalević-Filipović, A. (2012). Revised qualitative characteristics of financial statements as precondition for strengthening information power on capital market. Facta universitatis-series: Economics and Organization, 9(1), 81-92.
Forgel, O. and Berry, T. (2006). The Disposition Effect and Individual Investor Decisions: The Roles of Regret and Counterfactual Alternatives. Journal of Behavioural Finance, 7(2), 107–116.
Grinblatt,M. & M. Keloharju. (2009). Sensation Seeking, Overconfidence, and Trading Activity. The Journal of Finance, 64(2), 549-578.
Hasnan, S., Abdul Rahman, R., & Mahenthrian, S. (2008). Management predisposition, motive, opportunity, and earnings management for fraudulent financial reporting in Malaysia. Motive, Opportunity, and Earnings Management for Fraudulent Financial Reporting in Malaysia (December 15, 2008).
Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting horizons, 13(4), 365-383.
Humphrey, C. C., Moizer, P., & Turley, S. (1992). The audit expectations gap in the United Kingdom. Research Board, Institute of Chartered Accountants in England and Wales.
Jones, M. J. (2011). Creative accounting, fraud and international accounting scandals. John Wiley & Sons. Chichester. England: John Wiley and Sons Ltd.
Lathif, A., & Aktharsha, S. (2016). Determinants of investment decision-making: Behavioral perspective. SCMS Journal of Indian Management, 13(2), 122-128.
Lord, A. T. (2010). The Prevalence of Fraud: What should we, as academics, be doing to address the problem?. Accounting & Management Information Systems/Contabilitate Si Informatica De Gestiune, 9(1).
Malmendier, U., & Tate, G. (2005). Does overconfidence affect corporate investment? CEO overconfidence measures revisited. European financial management, 11(5), 649-659.
Montier, J. (2002). Behavioral Finance. Insights into Irrational Minds and Markets. West Sussex, England: John Wiley & Sons.
Odean, T. (1998). Volume, volatility, price, and profit when all traders are above average. The journal of finance, 53(6), 1887-1934.
Pompian, M.M. (2006). Behavioural Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases. New Jersey: Wiley.
Porter, B. (1997), Auditor's Responsibility with Respect to Corporate Fraud – A Controversial issue. In: Sherer, M. and Turley, S. (eds.) Current Issues in Auditing (3rd ed.). London: Paul Chapman.
Public Oversight Board. (2000). The panel on audit effectiveness: Report and recommendations.. Retrieved from: https://www.iasplus.com/en/binary/resource/pobaudit.pdf
Reilly, F. K., & Brown, K. C. (2011). Investment Analysis and Portfolio Management (Text Only). London: Cengage Learning.
Ritter, J. R. (2003). Behavioral finance. Pacific-Basin finance journal, 11(4), 429-437.
Rizzi, J. V. (2008). Behavioral bias of the financial crisis. Journal of Applied Finance (Formerly Financial Practice and Education), 18(2).
Robbins, Stephen P. & Coulter, Mary, (2002). Management (7th eds.). London: Prentice Hall.
Rosner, R. L. (2003). Earnings manipulation in failing firms. Contemporary accounting research, 20(2), 361-408.
Shiller, R. J. (2000). Irrational Exuberance. New Jersey: Princeton University Press.
Singleton, T. W., & Singleton, A. J. (2010). Fraud auditing and forensic accounting (Vol. 11). New Jersey: John Wiley & Sons.
Subash, R. (2012). Role of Behavioural Finance in Portfolio Investment Decisions: Evidence from India. Retrieved from: https://dspace.cuni.cz/handle/20.500.11956/43150
Takemura, K. (2014). Behavioural Decision Theory - Psychological and Mathematical Descriptions of Human Choice Behavior. Tokyo: Springer.
McAuley, I. (2013). Behavioural economics and public policy: Some insights. International Journal of Behavioural Accounting and Finance, 4(1), 18-31.
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. science, 185(4157), 1124-1131.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Assistant Prof. Dr. Manal Hussein Lafta, Aisha Abdulkarim
This work is licensed under a Creative Commons Attribution 4.0 International License.
