An Examination of Fraud Pentagon Effect in Indonesian Banking

Abstract

The purpose of this study is to examine the impact fraud pentagon in Indonesian banking. Fraud pentagon which has five elements including pressure, opportunity, rationalization, capability and arrogance are investigated. The samples of this study are based on the banks’ financial reports for the period of 2016 to 2018 covered 44 Indonesian banks. Collected data are analysed using logistic regression method. The research findings concluded that pressure which is proxied by institutional ownership and arrogance which is proxied by frequent number of CEO’s picture affect the fraudulent financial reporting. Meanwhile, financial target (one of pressure element proxy), opportunity (proxied by ineffective monitoring), rationalization (change in auditors), and capability (proxied by change in directors) have no effect to fraudulent financial reporting