Fraud Hexagon Theory in Thai Contexts: Testing Cultural Boundary Conditions of Financial Statement Fraud Determinants and Firm Value Implications

Abstract

This study examines fraud hexagon theory's cultural boundary conditions in Thai listed companies, identifying which elements operate universally versus requiring reconceptualization for relationship-based Asian economies. Using PLS-SEM analysis of 504 SET-listed companies (2,520 firm-years, 2020-2024), we find systematic theory-practice misalignment. Rationalization emerges as fraud risk's dominant predictor (β=0.394, p<0.01), while pressure shows modest effects (β=0.243, p<0.05). Three findings reveal cultural contingencies: opportunity and collusion demonstrate significant negative effects (β=-0.118 and β=-0.079 respectively) through alternative mechanisms, while arrogance shows no significant impact. Fraud risk strongly reduces firm value (β=-0.596, p<0.001) with full mediation patterns (VAF>80%) dominating. Corporate governance selectively moderates only pressure and rationalization, proving ineffective against capability, arrogance, and collusion. These patterns reveal fraud theory's two-tier structure: universal core elements (pressure, rationalization) functioning across contexts, and culturally contingent elements (opportunity, capability, arrogance, collusion) requiring fundamental reconceptualization. We demonstrate that governance functions as legitimacy signal rather than operational constraint in Thai contexts, business group coordination differs from fraud collusion, and Buddhist ethics provide richer rationalization frameworks than Western theory recognizes. Findings advance fraud scholarship by establishing cultural boundary conditions and inform fraud prevention strategies for relationship-based Asian markets.