Determinants of Fraudulent Financial Reporting with Board Diversity as A Moderation Variable in Infrastructure Companies Listed on The Indonesia Stock Exchange

Abstract

This research is motivated by the rampant cases  of Fraudulent Financial Reporting in Indonesia's infrastructure sector, which reflects the weak internal control and role of external audits, and shows the importance of identifying the factors that trigger the occurrence of financial statement fraud. This study aims to examine the influence of external pressure, less effective supervision, auditor change, board change, CEO duality, and political connection to fraudulent financial reporting, with board diversity as a moderation variable. This study uses a quantitative approach with secondary data from 45 infrastructure companies listed on the Indonesia Stock Exchange from 2019 to 2023. Data analysis was carried out using panel data regression with the help of Eviews software. The results showed that external pressure, less effective supervision, auditor change, board change and CEO duality had a significant effect on fraudulent financial reporting, while political connections had no significant effect. The findings of this study also show that board diversity moderates external pressure, less effective supervision, and CEO duality to fraudulent financial reporting. However, the diversity of the board does not moderate the change of auditors, the change of directors, and the political connection to fraudulent financial reporting. The implications of these findings underscore the importance of strengthening corporate governance through independent oversight, transparent leadership structures, and board diversity to minimize the risk of fraudulent financial reporting.