The Impact of Financial Pressures on Financial Statement Fraud in Sri Lanka
HAMVN Kaumadi, H Muthunayake · 2026
The objective of this study is to analyze the impact of financial pressures on the possibility of financial statement fraud within Sri Lanka&s;s capital goods sector. Financial pressure consists with external pressure, financial target, financial distress under this study. The research employs a deductive quantitative approach, analyzing secondary data from 30 capital goods companies listed on the Colombo Stock Exchange between 2019 and 2023. Logistic regression is used to examine the impact of the financial pressure on the possibility of fraudulent reporting. The Beinish M-Score model is applied to detect financial statement fraud, while financial pressures are operationalized using financial ratios such as leverage for external pressures, return on assets for financial targets, and the S-Score for financial distress. From the findings of this study, it has been identified that external pressure and financial Distress positively and significantly affect the chance of financial statement fraud, whereas financial targets have a significant and negative effect. The significance of improved internal control to overcome the concern of fraud is identified in this study. The limitations of this study are that it is conducted among a smaller population and restricted to the capital goods industry. Future research needs to cover other industries and include considerations of behavior and psychological issues. The findings of this study will act as a guideline to overcome financial pressure fraud in the capital goods industry in Sri Lanka.