http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2024826

Posted by John SOH Yong Ye, Year 4 undergrad at the School of Economics, Singapore Management University

Abstract:

Committing financial fraud is a serious breach of business ethics. However, there are few large scale studies of financial fraud that involve ethical considerations. In this study, we investigate the pervasive financial scandals, which by the end of 2012 involved more than a third of the U.S.-listed Chinese companies. Based on a sample of 262 U.S.-listed Chinese companies, we analyze factors that differentiate between firms that commit financial fraud and those that do not. We find that firms more predisposed to unethical behavior, due to their low regional social trust in the home country and low respect for regulations and laws as proxied by political connections, are more likely to commit accounting and financial fraud. They take advantage of low hurdles for listing via reverse mergers and avoid third-party monitoring through poor governance and auditors. Finally, we find evidence after these scandals of non-fraudulent firms differentiating themselves from the fraudulent firms by sending costly signals such as insiders purchasing shares, increasing dividends, and going private.

http://news.asiaone.com/news/asia/china-uncovers-power-abuses-nepotism-oil-giant

Posted by Joel CHUA Yong Sheng , Year 3 undergrad at the School of Business, Singapore Management University

BEIJING – China’s anti-corruption watchdog said on Saturday that it had uncovered evidence of graft at China Petrochemical Corp (Sinopec Group), warning the state-owned oil giant to take strong action to eradicate kickbacks, nepotism and theft.

Sinopec, the parent company of China Petroleum & Chemical Corp , must take steps to stop “power-for-money dealings” and prevent the loss of state assets, the Central Commission for Discipline Inspection (CCDI) said. Continue reading →