Stock option fraud prevention in Islamic country: does corporate governance matter?

Abstract

This paper aims to investigate the extent to which companies in one of the Islamic culture countries, Egypt, are complying with the Islamic implementation of the Anglo‐Saxon model of corporate governance and testing the impact, if any, of such compliance on mitigating of stock option fraud incentives. Design/methodology/approach – A logistic regression model is used to examine the effects of board of directors, audit committee, ownership structure and other firm characteristics on the likelihood of stock option fraud. The analysis is based on the data for stock option grants obtained during the period from 2006 to 2009. Findings – The results suggest that the rate of compliance with the Islamic implementation of the Anglo‐Saxon model of corporate governance in Egyptian public‐held companies is low. Weak corporate governance allows executives to exercise greater influence over the board of directors …