Determinants of management fraud in the banking sector of Ghana: the perspective of the diamond fraud theory

Christine Avortri and Richard Agbanyo

Journal of Financial Crime, 2020, vol. 28, issue 1, 142-155

Abstract: Purpose - Fraud has become one of the most challenging issues facing the financial sector of most countries globally. These fraudulent transactions have led to loss of huge sums of money to financial institutions, as well as to their depositors. The current crises in the financial sector of Ghana, especially among the Deposit Taking Institutions, has largely been attributed to connected lending and lending to affiliated party institutions which are fraudulent corporate governance issues. This study, therefore, aims to assess the determinants of fraud among management staffs in the banking sector of Ghana. Design/methodology/approach - This study is anchored on the fraud diamond theory (FDT). Primary data was collected from 120 management staffs of the remaining 23 universal banks in Ghana. Estimation was done using structural equation modelling with maximum likelihood estimation technique. Findings - Fraudulent activities in the banking sector of Ghana are driven by opportunities, pressure, rationalization and capacity to commit fraud, with capacity being the dominant factor. Practical implications - The regulator should strictly enforce the structure of shareholding as directed in the corporative governance directive to prevent ownership of a bank in the name of one person or a family, which gives high capacity to the Chief Executive Officers to misuse funds. The offenders should also be punished. Finally, the regulator should improve their supervision. Originality/value - This study places the FDT into the context of the current banking crises of Ghana. The study therefore goes a long way to guide the regulator and government to formulate and implement policies on shareholding structure of banks.

Keywords: Ghana; Banking crises; Banking fraud; Diamond fraud theory (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-06-2020-0102

DOI: 10.1108/JFC-06-2020-0102

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