Financial constraints, fraud and financial statements’ readability

Mahdi Salehi, Zainab Ahmadi and Pejman Mohammadi

Accounting Research Journal, 2026, vol. 39, issue 4-5, 565-590

Abstract: PurposeThis study aims to investigate the relationship between financial constraints and fraud and the readability of financial statements in the listed companies on the Iranian stock exchange.Design/methodology/approachA multiple regression is used to test the hypotheses. A sample of 1,351 observations from the stock exchange from 2015 to 2021 tests hypotheses via a multiple regression model based on the panel data and fixed effect model.FindingsFindings show that financial constraints negatively and significantly impact reporting readability. Moreover, the results indicate that financial constraints can motivate companies to engage in further fraudulent reporting.Originality/valueTo the best of the authors’ knowledge, this is the first study to address this issue in emerging markets. It provides helpful insights concerning the financial constraint and its impact on fraud and readability for users of financial statements, analysts and legal institutions. Results enormously help to develop knowledge and narrow the literature gap.

Keywords: Financial constraint; Financial statements fraud; Readability of financial statements (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-08-2024-0289

DOI: 10.1108/ARJ-08-2024-0289

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