Reestablishing Legitimacy After Corporate Frauds: The Role of Governance Structure in Restoring Financial Credibility in Emerging Economies

Bassam Al, Friedman Al and Ibrahim W
Additional contact information
Bassam Al: Department of Accounting, Administration & Economics. Al-Muthanna University, Iraq
Friedman Al: Department of Accounting, Administration & Economics. Al-Muthanna University, Iraq
Ibrahim W: Department of Economics and Management, Ferdowsi University

Journal Economic Business Innovation, 2024, vol. 1, issue 2, 163-179

Abstract: Purpose: his research aims to explore the relationship between changes in corporate governance structures and the financial recovery of firms following corporate fraud in emerging markets. The main focus of the research is to understand how governance changes can affect the financial credibility recovery of firms affected by fraud, with a case study of Iraq as an emerging market country. Method: This study uses a quantitative approach with data collected from non-financial companies listed on the Baghdad Stock Exchange. The Baneish M-score model was used to identify companies involved in fraud. A number of statistical methods were used to analyse governance changes and the financial performance of companies. Findings: This study found that firms involved in fraud tended to have weak governance before the fraud was uncovered. However, after the fraud, most firms made significant changes to their governance structure. This led to improved financial recovery of the firms, particularly in terms of financial reporting transparency and increased investor confidence, which in turn improved their market performance. Novelty: This research provides a novel contribution to the understanding of the importance of corporate governance reforms in the recovery process after corporate fraud, particularly in emerging markets such as Iraq. It presents country-specific governance dynamics and provides insights into effective recovery strategies. Implications: The findings of this study provide important insights for policymakers, regulators and business leaders in emerging markets. The research highlights the importance of improved governance and transparency in financial reporting to mitigate the negative impact of corporate fraud and to increase market confidence, which in turn will support the recovery and financial stability of companies involved in fraud.

Keywords: Corporate Governance; Corporate Fraud; Financial Recovery; Financial Reporting Transparency; Emerging Markets (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://analysisdata.co.id/index.php/JEBI/article/download/173/179 (application/pdf)
https://analysisdata.co.id/index.php/JEBI/article/view/173 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebi:journl:v:1:y:2024:i:2:p:163-179

DOI: 10.69725/jebi.v1i2.173

Access Statistics for this article

Journal Economic Business Innovation is currently edited by Agus Dwianto, S.E., M.Ak

More articles in Journal Economic Business Innovation from PT. Inovasi Analisis Data
Bibliographic data for series maintained by Prof. Agus Dwianto ().