This research explores the effect of fraud compliance of banks listed on the Indonesia Stock Exchange (BEI) over the period 2014– 2023. Employing panel data regression, the study evaluates how fraud prevention measures, including whistleblowing systems, customer grievance channels, service quality metrics, and client interaction indices, impact firm value, proxied by Price to-Book Value (PBV). The analysis incorporates control factors such as Good Corporate Governance (GCG), Risk-Based Bank Rating (RBBR) components (NPL, LDR, OER, NIM), and return on assets (ROA). Results demonstrate that whistleblowing and customer grievance systems significantly elevate firm value by fostering transparency and mitigating fraud risks. GCG and RBBR amplify this effect through robust oversight and financial stability, while profitability enhances banks’ capacity to address fraudulent activities. Customer Engagement Index (CEI) is the only Fraud Compliance proxy that found positively impacts PBV, indicating the high role of company involvement in customer relationships as a construct that can drive investment. The significant impact of NIM also indicates that healthy interest margins of the majority of banks keep investors loyal to management even in difficult conditions. This study enriches financial accounting and risk management scholarship by highlighting the role of non-financial compliance in value creation. It offers actionable insights for bank executives and policymakers to strengthen anti-fraud frameworks, aligning with regulatory mandates like POJK No. 12/2024. Future research may investigate qualitative dimensions of fraud prevention across diverse financial sectors.

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Fraud Compliance and Its Impact on Firm Value: Evidence from Indonesian Banking Sector

  • Rahelia Intan Cahyono,
  • Gatot Soepriyanto

摘要

This research explores the effect of fraud compliance of banks listed on the Indonesia Stock Exchange (BEI) over the period 2014– 2023. Employing panel data regression, the study evaluates how fraud prevention measures, including whistleblowing systems, customer grievance channels, service quality metrics, and client interaction indices, impact firm value, proxied by Price to-Book Value (PBV). The analysis incorporates control factors such as Good Corporate Governance (GCG), Risk-Based Bank Rating (RBBR) components (NPL, LDR, OER, NIM), and return on assets (ROA). Results demonstrate that whistleblowing and customer grievance systems significantly elevate firm value by fostering transparency and mitigating fraud risks. GCG and RBBR amplify this effect through robust oversight and financial stability, while profitability enhances banks’ capacity to address fraudulent activities. Customer Engagement Index (CEI) is the only Fraud Compliance proxy that found positively impacts PBV, indicating the high role of company involvement in customer relationships as a construct that can drive investment. The significant impact of NIM also indicates that healthy interest margins of the majority of banks keep investors loyal to management even in difficult conditions. This study enriches financial accounting and risk management scholarship by highlighting the role of non-financial compliance in value creation. It offers actionable insights for bank executives and policymakers to strengthen anti-fraud frameworks, aligning with regulatory mandates like POJK No. 12/2024. Future research may investigate qualitative dimensions of fraud prevention across diverse financial sectors.