Ponzi Accounting Functions in the Iranian Capital Market: A Grounded Theory Approach
Keywords:
Ponzi phenomenon, accounting practices, selective information disclosure, data-driven theory, Iranian capital marketAbstract
This study aims to identify and explain the functions of Ponzi accounting in Iranian capital market firms, focusing on causal, intervening, contextual conditions, strategies, and consequences. This developmental–exploratory study adopts a mixed-method approach grounded in inductive/deductive reasoning. Qualitative data were collected through in-depth, unstructured interviews with 12 experts, including certified accountants, financial policymakers, and standard-setting committee members, selected via theoretical and snowball sampling. Data were analyzed using grounded theory and the Strauss and Corbin (1998) paradigm model through open, axial, and selective coding, with validity ensured through triangulation . Findings indicate that Ponzi accounting functions emerge from causal conditions such as intra-structural and extra-structural pressures. Intervening conditions include weaknesses in IT systems and accountability culture, while contextual conditions involve ineffective business environments and weak corporate governance. Key strategies consist of financial information manipulation and information asymmetry, leading to consequences such as reduced accounting legitimacy and increased credit and competitive risks. Ponzi accounting reflects structural deficiencies in governance, organizational culture, and regulatory systems, generating a cycle of systematic misrepresentation that undermines financial transparency, erodes market trust, and heightens stakeholder vulnerability.
Downloads
References
Afshari, H., Ghojavand, Z., & Rasaiian, A. (2016). Determining the impact of substitution or complementarity in explaining the accrual quality and disclosure anomaly in the Tehran Stock Exchange. Financial Accounting Research Quarterly, 8(3), 43-58.
Amoah, B. (2018). Mr Ponzi with Fraud Scheme Is Knocking: Investors Who May Open. Global Business Review, 19(5), 220-249. https://doi.org/10.1177/0972150918788625
Bai, M., Zhang, D., Bai, H., & Qin, Y. (2025). Internal and external managerial challenges of Ponzi financing in China. International Journal of Managerial Finance, 21(4), 1086-1111. https://doi.org/10.1108/IJMF-01-2025-0005
Baltacı, A., & Vural, A. (2024). Anatomy of herd behavior in Ponzi schemes within the scope of marketing mix. Qualitative Research in Financial Markets, ahead-of-print(ahead-of-print). https://doi.org/10.1108/QRFM-09-2023-0218
Bhadra, S., & Singh, K. N. (2024). Ponzi scheme like investment schemes in India, causes, impact and solution. Journal of Money Laundering Control, 27(2), 348-362. https://doi.org/10.1108/JMLC-02-2023-0040
Dewi, I. K., & Wahyudi, I. (2025). The Evolution of Ponzi Schemes: From Traditional Frauds to Digital Money Games. Journal of Auditing, Finance and Forensic Accounting, 13(1), 1-29. https://doi.org/10.21107/jaffa.v13i1.29535
Eisenberg, D. T., & Quesenberry, N. W. (2014). Ponzi Schemes in Bankruptcy. Touro Law Review, 30(3), 38-55. https://digitalcommons.tourolaw.edu/lawreview/vol30/iss3/3
Frina, A., Fréchette, G., Ispano, A., Lizzeri, A., & Perego, J. (2024). The Selective Disclosure of Evidence: An Experiment. NATIONAL BUREAU OF ECONOMIC RESEARCH, 4(3), 48-76. https://doi.org/10.3386/w32975
Haryadi, B., Wahyudi, I., & Hayati, N. (2022). Uncovering the Dark Side of Ponzi Schemes Through Money Game. Jurnal Ilmiah Akuntansi Dan Bisnis, 17(2), 201-213. https://doi.org/10.24843/JIAB.2022.v17.i02.p02
Hofstetter, M., Mejía, D., Rosas, J. N., & Urrutia, M. (2018). Ponzi schemes and the financial sector: DMG and DRFE in Colombia. Journal of Banking & Finance, 96(2), 18-33. https://doi.org/10.1016/j.jbankfin.2018.08.011
Jory, S., & Perry, M. J. (2011). Ponzi Schemes: A Critical Analysis. Journal of Financial Planning, 4(1), 87-101. https://ssrn.com/abstract=1894206
Khanaki, A. M., Farzinfar, A. A., Safari Gerayli, M., & Arabzadeh, M. (2023). Evaluating the exploratory dimensions of forensic accounting: A two-stage fuzzy process. Empirical Research in Accounting, 13(3), 189-210.
Luo, T., & Xiao, Z. (2015). Selective Disclosure Associated with Institutional Investors: Evidence Based on Chinese Stock Market. Annals of Economics and Finance, 16(2), 515-542.
Peng, Z., & Boyle, P. P. (2025). Ponzi Schemes: A Review. Annals of Actuarial Science, 2(1), 66-87. https://doi.org/10.2139/ssrn.5019934
Rezaei, M., Mansouri, F., & Faghani, M. (2021). The Impact of Corporate Governance Systems on Avoiding Companies Falling into Ponzi Schemes: Case Study of Tehran Capital Market. Ethics and Behavioral Studies in Accounting and Auditing, 1(1), 93-112.
Shafakheyberi, N., Hirad, A., Abdoli, M., & Sotoudeh, R. (2025). Ontology of the Ponzi nature in the emergence of opportunistic accounting procedures: Presenting a paradigmatic phenomenological model. Empirical Studies in Financial Accounting, 22(88), 219-325.
Strauss, A. L., & Corbin, J. (1998). Basics of qualitative research: Grounded theory: Procedures and Technique (2nd Edition ed.). Sage.
Suwitho, S., Riharjo, I. B., & Dewangga, D. A. (2023). The nexus between Ponzi scheme and multi-level marketing systems: Evidence in Indonesia. Cogent Social Sciences, 9(1), 111-136. https://doi.org/10.1080/23311886.2023.2178540
Ullah, I., Ahmad, W., & Ali, A. (2022). Determinants of investment decision in a Ponzi scheme: Investors' perspective on the Modaraba scam. Journal of Financial Crime, 29(4), 1172-1190. https://doi.org/10.1108/JFC-02-2020-0027
Uppiah, V. (2018). A critical examination of the regulation of Ponzi scheme in Mauritius. International Journal of Law and Management, 60(6), 1393-1400. https://doi.org/10.1108/IJLMA-08-2017-0201
