ROLE OF CORPORATE GOVERNANCE IN MITIGATING FINANCIAL FRAUD

Abstract

The purpose of this research is to evaluate how corporate governance reduces financial fraud. The study has chosen two independent variables to measure fraud: the capital adequacy ratio and nonperforming loans. Independent firm-specific and corporate governance variables include board size, audit committee meetings, return on equity, return on assets, and leverage. The purpose of this research is to evaluate the state of corporate governance in the banking industry in Nepal and investigate the effects of firm-specific and corporate governance characteristics on variables used to measure fraud. Using a convenience sample technique, the secondary data were taken from the eight commercial banks' published annual reports. SPSS Software Version 25 was used to analyze the data using a quantitative approach and descriptive analysis. The significance and importance of corporate governance of Nepalese commercial banks are tested using multiple regression models. The study employs data from eight commercial banks covering the years 2075 to 2080. The results indicate that while board size and leverage have no significant effect on fraud measurement factors, ROA, ROE, and the number of audit committee meetings have a significant impact on fraud measuring variables. The study concludes that leverage, ROA, and ROE all positively relate to capital adequacy ratio. The size of the board and the frequency of audit committee meetings are positively correlated with the capital adequacy ratio. The relationship between leverage and non-performing loans compared to the total loan is negative for both ROE and leverage.