Purpose: The purpose of this master’s thesis is to examine the phenomenon of prohibited loans as a form of economic crime and to explore why such offenses occur and how they can be prevented. To address this, we formulated four hypotheses, suggesting that companies involved in such violations are more likely than control companies to: operate within high-risk industries and  be smaller in size, have no auditor, face bankruptcy, and have a worse financial situation in the year the offense occurred.

Design/methodology/approach: This study employs a quantitative method combined with a deductive approach. To test our hypotheses, we apply Fraud Triangle Theory and Agency Theory as theoretical frameworks. Our hypotheses are grounded in previous research by Finnerty et. al. (2016), Skousen et.al. (2009), and Bianchi et. al. (2022), whose studies have contributed to the field of fraud theory and economic crime. The methodological approach is based on the Panel data regression model, which we use to test multiple hypotheses, as well as a t-test applied to evaluate one specific hypothesis.

Findings: The results show a significant association between companies involved in prohibited loans and both bankruptcy and the absence of an auditor. The t-test confirms that these companies also exhibited weaker financial performance in the year the offense occurred. However, we could not confirm a significant association between prohibited loans and affiliation with high-risk industries.

Originality: To our knowledge, no previous study has specifically examined prohibited loans within a Swedish or other international context. 

Research Limitations: A key limitation is that only detected offenses are included; undetected cases in the control group may bias the results.

Practical Implications: Strengthening auditor oversight is crucial for preventing prohibited loans, particularly during periods of financial stress. Regulatory efforts should prioritize addressing internal corporate pressures over external risk factors.

Social Implications: This study supports the development of strategies to prevent prohibited loans, contributing to greater transparency, accountability, and trust in the business sector.