Would you trust a company who tampered with its gas meters to publish accurate financial reports to its investors?

Posted by LIN Liye, Year 4 undergrad at the School of Economics, Singapore Management University

On Friday, there was a Straits Times article on Paradise Group, a successful restaurant chain with operations mainly in Singapore and in other parts of Asia. Paradise Group is a familiar name among Singaporeans with its restaurants serving Chinese cuisine in both fine dining and casual settings. Personally, I was surprised that this unlisted restaurant chain would resort to such measures to defraud a local gas company on one of the most important cost items for a restaurant. Being a successful brand, I thought the CEO would have cared more about the reputation of the brand and himself instead of looking to cut corners by tampering with the gas meters.

This leads me to my main question today: Assuming Paradise Group is a listed company, would you still have enough faith in the financial statements of the company to believe them and invest in the company? Through this incident, the poor character of the management is exposed. As the saying goes, there is never just one cockroach in the kitchen. Who knows where else the management had cut corners, or if they had engaged in fancy accounting measures to make their accounting numbers nicer to minority investors?

Warren Buffett once said this: “Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.” In this case, even if Paradise Group had fantastic accounting figures and they are a listed company, I would think twice before investing my money with the company.

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