Investigating Financial Statement Fraud in Ghana Using Beneish M-Score: A Case of Listed Companies on the Ghana Stock Exchange

Mike Adu-Gyamfi


This quantitative research was conducted to detect the possibility of earnings manipulation by listed companies on the Ghana Stock Exchange, determine the relationship between company size and earnings manipulation and find out the existence of a correlation between share price and earnings manipulation. Using 22 companies out of a total of 41 listed companies, financial data gathered from published financial statements on the companies’ websites, Ghana Stock Exchange website and Annual Report Ghana website were examined from 2011 to 2016. Applying Beneish M-score model for the period 2011-2016, it was found that 26.2% of the sample size on the average were involved in creative accounting. The study also found that 28.4% of the small companies on the average were involved in earnings manipulation during the period 2011-2016 as compared to 25.4% of the big companies. However, the Mann-Whitney U test conducted revealed that there is no statistically significant difference between the level of earnings manipulation and company size. Spearman’s correlation analysis was conducted, firstly, on the entire sample and separately on the small and big companies. The results of the analysis showed that earnings manipulation and share price, statistically, were not significantly correlated. The quantitative research provides an insight into the level of earnings management amongst listed companies in Ghana and the appropriateness of the M-score model in detecting earnings manipulation. The evidence of incidence of creative accounting amongst the sampled companies is an indication of the need for more stringent measures to curb such practice to ensure the stability of the Ghanaian stock market and protect investor interest.

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