Fraudulent Financial Reporting in Manufacturing Companies: Does Intellectual Capital Matter?

Manufacturing companies cannot survive market competition if they only utilize tangible resources. The existence of intellectual capital in manufacturing companies plays an important role in increasing the added value that is useful for sustainability and financial performance. Having intellectual capital helps suppress opportunistic behavior that can lead to fraudulent financial statements. Manufacturing companies should optimize intellectual capital to minimize the risk of financial statement fraud. It aims to investigate the relationship between intellectual capital, human capital, structural capital, relational capital, and financial statement fraud. The total research sample selected was 226 companies from a total population of 502. The findings demonstrate that relational and intellectual capital significantly reduce financial statement fraud. The effects of human capital and structural capital, however, are not significant. Having high levels of intellectual capital and relational capital will provide a competitive advantage for manufacturing companies that can prevent opportunistic behavior.