Determinants of management fraud in the banking sector of Ghana: the perspective of the diamond fraud theory
| Date | 17 July 2020 |
| Published date | 17 July 2020 |
| DOI | https://doi.org/10.1108/JFC-06-2020-0102 |
| Pages | 142-155 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
| Author | Christine Avortri,Richard Agbanyo |
Determinants of management
fraud in the banking sector of
Ghana: the perspective of the
diamond fraud theory
Christine Avortri and Richard Agbanyo
Department of Banking and Finance, University of Professional Studies,
Accra, Ghana
Abstract
Purpose –Fraud has becomeone of the most challenging issues facing the financial sectorof 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 financialsector 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
determinantsof fraud among management staffs in the banking sector of Ghana.
Design/methodology/approach –This study is anchoredon the fraud diamond theory (FDT). Primary
data was collected from 120 management staffs of the remaining 23 universal banks in Ghana. Estimation
was done usingstructural equation modelling with maximumlikelihood estimation technique.
Findings –Fraudulent activities in the banking sector of Ghana are driven by opportunities, pressure,
rationalizationand capacity to commit fraud, with capacity being the dominantfactor.
Practical implications –The regulator should strictlyenforce the structure of shareholding as directed
in the corporativegovernance directive to prevent ownership of a bank in the name of one personor 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 bankingcrises of Ghana.
The study therefore goes a long way to guide the regulator and government to formulate and implement
policieson shareholding structure of banks.
Keywords Ghana, Banking crises, Banking fraud, Diamond fraud theory
Paper type Research paper
1. Introduction
The interest of scholars to understand what pushes people to commit financial crime
continues to gain much attention over the years (van Driel, 2019). This may largely be
attributed to global increasing rate of fraudulentactivities in the financial sector as a whole
and in the banking sector in particular. These fraudulent activities have devastating
consequences for the stabilityof not only the banking sector but also the financial sector as a
whole (Bonsu et al.,2018) and also affect the profitability of the banks, especially in
developing countries (Bolarinwa and Soetan, 2019). In Ghana, there are evidence that the
current crises in the banking sector has largely been attributed to fraudulent and unethical
conducts of Chief Executive Officers (CEO), Board of Directors and Executive Directors of
banks in the form of breach of single obligorlimits, connected lending, diversion of funds to
affiliated institutionsand concealing the true financial position of the banks (Bank of Ghana,
2018;PricewaterhouseCoopers Ghana, 2019). Moreover, the banks that collapsed in the
JFC
28,1
142
Journalof Financial Crime
Vol.28 No. 1, 2021
pp. 142-155
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-06-2020-0102
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