Fraud Hexagon Theory in Thai Contexts: Examining Cultural Boundary Conditions of Financial Statement Fraud Determinants, Firm Value, and Sustainable Governance

Abstract

This study examines fraud hexagon theory's cultural boundary conditions in Thai listed companies, identifying which elements operate universally versus requiring reconceptualization for sustainable governance in relationship-based Asian economies. Using panel fixed-effects and random-effects regression, applied to 504 SET-listed companies (2520 firm-years, 2020–2024), we find systematic theory-practice misalignment with significant implications for ESG governance assessment and institutional strengthening. Rationalization emerges as fraud risk's dominant predictor (β = 0.387, p < 0.001), while pressure shows consistent positive effects. Four findings reveal cultural contingencies challenging Western ESG assumptions: opportunity and collusion demonstrate significant negative effects consistent with the governance-as-legitimacy-signal and business-group-coordination frameworks, while capability (β = 0.011, p = 0.264) and arrogance show no significant impact, indicating that these Western individualistic constructs fail to translate into Thailand's collectivist, network-based fraud dynamics. Fraud risk strongly reduces firm value (β = −0.541, p < 0.001). Corporate governance shows no significant moderation effects on any fraud hexagon element, demonstrating uniform ineffectiveness as a constraint mechanism in Thailand's institutional context. These patterns reveal fraud theory's two-tier structure: universal core elements (pressure, rationalization) and culturally contingent elements (opportunity, capability, arrogance, collusion) requiring fundamental reconceptualization for sustainable finance applications.