This study aims to investigate the relationship between financial constraints and fraud and the readability of financial statements in the listed companies on the Iranian stock exchange.
A multiple regression is used to test the hypotheses. A sample of 1,351 observations from the stock exchange from 2015 to 2021 tests hypotheses via a multiple regression model based on the panel data and fixed effect model.
Findings show that financial constraints negatively and significantly impact reporting readability. Moreover, the results indicate that financial constraints can motivate companies to engage in further fraudulent reporting.
To the best of the authors’ knowledge, this is the first study to address this issue in emerging markets. It provides helpful insights concerning the financial constraint and its impact on fraud and readability for users of financial statements, analysts and legal institutions. Results enormously help to develop knowledge and narrow the literature gap.
