Using Beneish model to detect corporate financial statement fraud in Greece
| Date | 03 October 2016 |
| Published date | 03 October 2016 |
| Pages | 1063-1073 |
| DOI | https://doi.org/10.1108/JFC-11-2014-0055 |
| Author | Spyridon Repousis |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Using Beneish model to detect
corporate nancial statement
fraud in Greece
Spyridon Repousis
Department of Economics, University of Peloponnese, Greece
Abstract
Purpose – This paper aims to investigate empirically the eight-variables Beneish M-model to identify
occurrence of nancial statement fraud or tendency to engage in earning manipulation.
Design/methodology/approach – A data set of 25,468 companies (Société Anonyme and Limited
Liability Companies) in Greece was analyzed during two-year period of 2011-2012. Financial statements
of banks are excluded.
Findings – The results showed that 8,486 companies or 33 per cent of the whole sample has a greater
than ⫺2.2 score, which is a signal that companies are likely to be manipulators. Also, for manipulators,
results using F-distribution showed that days sales in receivable index (DSRI), asset quality index
(AQI), depreciation index, selling, general and administrative expenses index (SGAI), total accruals to
total assets index and leverage index (LVGI) are signicant at 99 per cent condence level in its effect
on Beneish M-score. Also, there is a signicant relationship between earning management, as expressed
by Beneish M-score and each one of variables, DSRI, AQI, gross margin index, sales growth index, SGAI
and LVGI. Most of all, DSRI explains 95.92 per cent of the variation in Beneish M-score in statistical
terms.
Practical implications – Results are important for banking system, because nancial statements
information inuence credit decisions of banks. Debt agreements include terms based upon accounting
numbers. Also, using Beneish Model, it is a cheap and easy way for examiners of possible fraudulent
activity.
Originality/value – To the best of the author’s knowledge, there is a great lack of research in Greece,
using Beneish model. There is only one more study using the Beneish model, examining only a few
companies listed in Athens Stock Exchange during 1999-2000. Findings have also important
implications not only for banks but also for users of Greek nancial statement accounts, especially to
investors, auditors, regulators, to taxation and other state authorities.
Keywords Greece, Beneish model, Financial statement fraud
Paper type Research paper
1. Introduction
Financial statement fraud continues to be a signicant problem for businesses of all
sizes. It used to be that the biggest problems with fraudulent statements were found in
smaller companies but that before Enron, Worldcom, Tyco, Adelphia, Xerox and
Parmalat.
The generally accepted denition of nancial statement fraud is:
The deliberate misrepresentation of the nancial condition of an enterprise accomplished
through the intentional misstatement or omission of amounts or disclosures in the nancial
statements in order to deceive nancial statement users.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
Corporate
nancial
statement
fraud
1063
Journalof Financial Crime
Vol.23 No. 4, 2016
pp.1063-1073
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-11-2014-0055
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