Board Independence and Corporate Fraud: The Case of Tunisian Firms

Abstract The question we address in this paper is: what is the role played by corporate governance in mitigating financial statement fraud in emerging markets? To answer this question, we investigate the link between corporate financial statement fraud and Board of Directors on a sample of 64 Tunisian firms, with 32 fraud firms matched by 32 no fraud similar (control) companies. Since our dependent variable is binary (fraud versus no fraud), we use a logistic regression to explain how the probability of fraud can be determined by governance variables. Our main results show that there is a significant difference in governance variables between fraudulent and control firms. Moreover, we confirm the importance of governance variables in explaining the probability of fraud since we find that firms with a board of directors dominated by family members and with tenure of outside directors are more likely to commit fraud in financial statement. Arabic Abstract: