Abstract

Information asymmetry is everywhere in financial status, financial information, and financial reports due to agency problems and thus may seriously jeopardize the sustainability of corporate operations and the proper functioning of capital markets. In this era of big data and artificial intelligence, deep learning is being applied to many different domains. This study examines both the financial data and non-financial data of TWSE/TEPx listed companies in 2001–2019 by sampling a total of 153 companies, consisting of 51 companies reporting financial statement fraud and 102 companies not reporting financial statement fraud. Two powerful deep learning algorithms (i.e., recurrent neural network (RNN) and long short-term memory (LSTM)) are used to construct financial statement fraud detection models. The empirical results suggest that the LSTM model outperforms the RNN model in all performance indicators. The LSTM model exhibits accuracy as high as 94.88%, the most frequently used performance indicator.

Highlights

  • Information asymmetry is commonplace in the capital markets due to agency problems [2]

  • Two deep learning algorithms (i.e., recurrent neural network (RNN) and long short-term memory (LSTM)) are used to construct the detection model for financial statement fraud based on financial data and non-financial data

  • Information asymmetry is commonplace in capital markets due to agency problems

Read more

Summary

Introduction

Information asymmetry is everywhere in financial status, financial information, and financial reports due to agency problems and may seriously jeopardize the sustainability of corporate operations and the proper functioning of capital markets In this era of big data and artificial intelligence, deep learning is being applied to many different domains. A buyer who has been cheated would tell others, and as a result, all buyers would only be willing to make low price offers for secondhand cars so as to mitigate risks and avoid losses. Information asymmetry is commonplace in the capital markets due to agency problems [2] This is the case with financial statements on which companies present operating results, corporate health, and the ability for sustainable development.

Objectives
Methods
Discussion
Conclusion
Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call