Providing a Model for Explaining Fraudulent Financial Reporting Based on Managers’ Characteristics

Abstract

Fraudulent financial reporting, as one of the primary challenges of capital markets, undermines investor trust and threatens economic sustainability. Accordingly, the main objective of this study was to present a comprehensive model explaining the factors influencing fraudulent financial reporting based on managers’ characteristics in companies listed on the Tehran Stock Exchange. This study is applied in terms of purpose and employs a mixed (qualitative–quantitative) exploratory design. In the qualitative phase, conducted between January 2024 and July 2024, thematic analysis was applied to semi-structured interviews with experts to identify the dimensions and components of the model. In the quantitative phase, conducted from August 2024 to February 2025, the extracted model was validated through a researcher-made questionnaire administered to the statistical population, using structural equation modeling (PLS). Furthermore, relationships among dimensions were analyzed using the interpretive–structural DEMATEL (ISM–DEMATEL) technique. Results from the qualitative phase led to the identification of five main dimensions, twenty components (secondary themes), and 160 primary themes. The main dimensions of the model included managers’ knowledge and expertise, organizational and environmental pressures, opportunities for committing fraud, managers’ individual motivations, and managers’ personality and psychological traits. The findings indicate that fraudulent financial reporting is influenced by five key dimensions: managers’ knowledge and expertise, organizational and environmental pressures, opportunities for committing fraud, individual motivations, and personality and psychological characteristics. This conceptual model can enhance understanding of the factors shaping fraudulent behavior and support the development of preventive policies and control systems.