Relationship between Fraudulent Financial Statement and Cash Holding: Evidence from Market for Alternative Investment (MAI)
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Abstract
This Article aimed to (1) study the approach to cash holdings, (2) study the patterns of fraud in financial statements through the calculation of M-Score according to Beniesh's model, and (3) study the relationship between fraud in financial statements and cash holdings—sample of 614 firm-years on the MAI Stock Exchange between 2018 and 2022. The variables are fraud in financial statements and cash holding. The researchers expect that investors will use the research results to analyze financial information for decision-making. The research results were: 1) Cash holdings calculated from cash and cash equivalents divided by total assets. The average value is 0.09723, which is considered to have a high cash holding level. 2) Fraud in the financial statements calculated based on the M-Score has an average value of -4.20959 and 53 data points, accounting for 8.63% with an M-Score of more than -1.78, indicating that there is a high probability that the financial report will be earning management. 3) The inferential data analysis with financial statement fraud (M-Score) as the independent variable and cash holding as the dependent variable to see the relationship between the variables. The analysis results found that the coefficient was 0.000 without statistical significance. The control variables, namely the size and net working capital ratio (NWCR), have coefficient values of 0.011 and 0.015, respectively, with statistical significance at 0.05. In contrast, the capital expenditure variable (CAPEX) has a coefficient of 0.210 without statistical significance. In conclusion, the independent variable, financial statement fraud (M-Score), did not influence the dependent variable, cash holdings (CASH).
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