Corporate Governance Mechanisms and Prevention of Financial Fraud: A Review of Indian Corporate Scandals

Abstract

Corporate governance serves as the foundational pillar for ensuring transparency, accountability and ethical conduct in modern corporations. India's corporate landscape has been repeatedly scarred by high-profile financial frauds from the Harshad Mehta securities scam of 1992 to the Satyam Computer Services scandal of 2009, the Punjab National Bank (PNB)-Nirav Modi fraud of 2018, the Infrastructure Leasing and Financial Services (IL&FS) collapse of 2018 and the Yes Bank crisis of 2020 exposing persistent deficiencies in governance mechanisms, regulatory oversight and auditor independence. This review article critically examines corporate governance mechanisms including board composition, audit committee effectiveness, ownership structures, whistleblower policies and regulatory frameworks and evaluates their role in preventing financial fraud in the Indian corporate context. Drawing on agency theory, stewardship theory and the fraud triangle model, the review synthesises evidence from landmark Indian corporate scandals, statutory provisions under the Companies Act 2013, SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations 2015 and the Kotak Committee recommendations (2017). The review finds that while India's legislative architecture for fraud prevention has substantially strengthened, enforcement gaps, promoter concentration and auditor collusion continue to undermine governance effectiveness. The article concludes with policy recommendations to build a more resilient corporate governance ecosystem in India.