Iranian Journal of Finance

Firm-Level Prediction of Money Laundering Risk in Iranian Listed Companies; an Integrated Quantitative-Qualitative Approach

Document Type : Original Article

Authors

Alireza Saranj 1
Meysam Bolgorian 2
Mohammad Nadiri 1
Mojtaba Taghipour 3

1 Associate Prof., Department of Financial Management, Faculty of Accounting and Management, Farabi Campus, University of Tehran, Tehran, Iran.

2 Assistant Prof., Department of Financial Management and Financial Engineering, Faculty of Financial Sciences, Kharazmi University, Tehran, Iran.

3 PhD Candidate in Finance- Banking, Faculty of Management and Accounting, Farabi Campus, University of Tehran, Tehran, Iran.

10.30699/ijf.2025.526296.1519
Abstract
The primary objective of this study is to develop a predictive model for money laundering risk in Iranian listed firms. Initially, firm-level money laundering risk is measured using auditor assessments of anti-money laundering (AML) activities disclosed in annual audit reports. Subsequently, a quantitative modeling approach is employed, using financial and governance-related variables identified in prior research. To validate the quantitative findings, a qualitative approach based on grounded theory is also applied to identify additional explanatory factors. This research follows a mixed-methods design, incorporating both quantitative and qualitative phases. In the quantitative phase, a panel logit regression model is estimated using data from 1,680 firm-year observations covering the period 2012–2023. Independent variables include firm size, return on equity, leverage, investment opportunities, board independence, and board size. In the qualitative phase, semi-structured interviews were conducted with 10 experts to identify key risk factors, followed by the design and administration of an 18-item questionnaire distributed to 110 professionals. Exploratory factor analysis was then used to extract latent variables. The quantitative analysis reveals significant relationships between money laundering risk and several variables, such as firm size (positive), return on equity (negative), leverage (positive), and board independence (negative). The qualitative analysis identifies three core factors: (1) organizational culture and employee training, (2) corporate governance, and (3) a composite factor comprising compliance, organizational complexity, financial performance, firm size, and capital structure. Together, these factors explain over 50% of the variance in expert responses. The convergence of results from both methodological approaches confirms the robustness of the proposed model. Corporate governance indicators—particularly board size and independence—alongside financial attributes such as firm size, profitability, and capital structure, are found to be significant predictors of firm-level money laundering risk. The findings underscore the importance of strengthening internal control mechanisms and compliance structures in reducing money laundering risk.

Keywords

Money Laundering Risk (MLR)
Corporate Governance
Financial Performance
Grounded Theory
Risk Prediction Model
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Iranian Journal of Finance
Volume 9, Issue 4
2025
Pages 117-139

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