Financial information manipulation: an application of BIST Industrials Index

The aim of this study is to determine whether companies in the BIST (Borsa Istanbul) Industrial Index have made financial information manipulation using the financial reports they published between 2013 and 2016. Among the financial information manipulation detection models, the M-Score Model was used with some changes in the model variables in order to achieve this goal. For the distinction between companies that do and do not manipulate financial information, we used the Capital Markets Board Weekly Bulletins published between January 1, 2013 and June 30, 2017, and the company press releases published in the Public Disclosure Platform website at the same dates. Although there are differences between the companies in the control and manipulator groups in terms of the distributions of each independent variable, it was observed that five out of eight independent variables in the model (days in receivables index, gross margin index, depreciation index, marketing, sales, general and administrative expenses index and ratio of the revenue to profit from continuing operations) gave statistically significant results within the 95% confidence interval. Finally, we found that the model has a success rate of 84% in the manipulator company prediction and 53% in the control company prediction considering the years 2014, 205 and 2016.