- Moody’s said on March 11 that 5.1 percent of the high-yield companies it scores in China had defaulted in 2014, higher than the 3.9 percent average default rate elsewhere in Asia. The ratings company downgraded Yingde Gases Group Co. by one step to Ba3 on Jan. 27, citing challenges in a weak steel industry. Yingde’s ratio of debt to assets increased to 53.6 percent at year end from 49.7 percent in 2013.
- The latest 2014 filings showed Winsway and underground mall builder Renhe Commercial Holdings Co. didn’t earn enough in their normal course of business to pay interest on their borrowings. Texhong Textile Group Ltd., developer Oceanwide Holdings Co. and Yingde Gases had the highest amount of debt compared with their assets. Winsway is the midst of restructuring its debt to improve its financial situation, Beijing-based spokeswoman Laura Shi said by e-mail Monday. Officials at Yingde, Texhong and Renhe didn’t reply to e-mails and phone calls seeking comment.
Yingde Gases (2168 HK):
- Other Receivables: RMB74.2m (FY09, 2.8% of current assets) to RMB282.9m (FY10) to RMB363.2M (FY11) to RMB530.6m (FY12) to RMB610.9m (FY13) to RMB969.4m (FY14, 26.3% of current assets)
- Other non-current assets: RMB156m (FY09) to RMB1.2bn (FY14)
- Gross Debt: RMB1.9bn (FY09) to RMB9.8bn (FY15)
- OCF – Capex: RMB478m – RMB773m (FY09) to RMB925m – RMB2.1bn (FY14)
China Junk Bonds Pose Most Risk Since ’04 on Credit-Quality Dips
byDavid YongChristopher LangnerLianting Tu
April 14, 2015
Investors in Chinese junk bonds are taking the biggest gamble in at least a decade.
Leverage for speculative-grade Chinese companies is at its highest since at least 2004, whether measured by earnings relative to interest expense or total debt to a measure of cash-flow, according to data compiled by Bloomberg using a Bank of America Merrill Lynch index. Borrowers have also piled on the most debt relative to their assets since 2007. Continue reading
14 April 15
(970) Sparkle Roll: Sparkle Roll Group Limited issued profit warning for the year ended 31 March 2015 due to the (i) decrease in revenue and gross profit from sales of automobiles, watches and jewelries due to the PRC government’s anti-extravagance policies; (ii) approximately HK$10,000,000 losses onforward foreign exchange contracts as a result of the depreciation of the Euro and Swiss Franc against Hong Kong dollars; and (iii) approximately 30% increase in finance costs arising from purchase of automobiles in the fourth quarter of the current financial year.
02 July 14
(970) Sparkle Roll: Sparkle Roll said Mok Henry Wing Kai has tendered his resignation as the chief financial officer, the company secretary and an authorized representative due to personal reasons but retained as a consultant to the company starting from 1 October 2014 to 31 December 2014 or such later date as mutually agreed
Journal of Banking & Finance Volume 55, June 2015, Pages 92–106
Protection or expropriation: Politically connected independent directors in China
This paper empirically investigates politically connected independent directors among Chinese listed firms using 7487 firm-year observations from the Shanghai stock exchange during the period of 2003–2012. We distinguish between privately controlled firms and state-controlled firms. We find that the value effect and incentives of appointing independent directors with political ties are shaped by a firm’s ownership structure. More exactly, Chinese listed privately controlled firms with a large fraction of politically connected independent directors tend to outperform their non-connected counterparts, due to the ease of access to external debt financing and more subsidies from the government. However, the appointment of politically connected independent directors also enlarges the magnitude of related-party transactions with the controlling party in listed privately controlled firms. In contrast, having politicians as independent directors does not help to add value to listed state-controlled firms, especially firms controlled by the local government, due to the expropriation of minority investors via more related-party transactions and more severe over-investment problems.
Journal of Accounting and Economics Volume 60, Issue 1, August 2015, Pages 36–55
Market (in)attention and the strategic scheduling and timing of earnings announcements
Ed deHaana, , Terry Shevlinb, , , Jacob Thornockc,
We investigate whether managers “hide” bad news by announcing earnings during periods of low attention, or by providing less forewarning of an upcoming earnings announcement. Our findings are consistent with managers reporting bad news after market hours, on busy days, and with less advance notice, and with earnings receiving less attention in these settings. Paradoxically, our findings indicate that managers also report bad news on Fridays, but we do not find lower attention on Fridays. Further, we find negative returns when the market is notified of an upcoming Friday earnings announcement, which is consistent with investors inferring forthcoming bad news.
Thailand: Bounty and gratuity regulations to become effective on 16 April 2015
10 April 2015
Thai News Service
Section: Business News – The Capital Market Supervisory Board approved regulations on payment of bounty to the informer as well as payment of gratuity to the arrestor in cases where fine is imposed on insider trading and market manipulation offenders under Sections 241 and 243 of the Securities and Exchange Act B.E. 2535 (1992). The bounty and gratuity will be paid in the amount up to 30% of the fine paid to the court or as ordered by the Settlement Committee. Continue reading
‘Price Waterhouse Partners connived with company’s founders’
- R. Sukumar
14 April 2015
The Times of India
HYDERABAD: The trial court of Central Bureau of Investigation (CBI) in India’s largest accounting fraud at Satyam Computer has construed that the two former partners of audit firm PriceWaterhouse had `connived’ with the software outsourcer’s founders in fudging accounts, a claim the audit firm continues to contest. Continue reading
Does Internal Audit Function Quality Deter Management Misconduct?
Ege, Matthew S.1
Accounting Review. Mar2015, Vol. 90 Issue 2, p495-527. 33p. 7 Charts.
Standard-setters believe high-quality internal audit functions (IAFs) serve as a key resource to audit committees for monitoring senior management. However, regulators do not enforce IAF quality or require disclosures relating to IAF quality, which is in stark contrast to regulatory requirements placed on boards, audit committees, and external auditors. Using proprietary data, I find that a composite measure of IAF quality is negatively associated with the likelihood of management misconduct even after controlling for board, audit committee, and external auditor quality. This result is robust to a variety of other specifications, including controlling for internal control quality and separate estimation during the pre- and post-SOX time periods. A difference-indifferences analysis indicates that misconduct firms have low IAF quality and competence during misconduct years and improve IAF quality and competence in the post-misconduct years. These findings suggest that regulators, audit committees, and other stakeholders should consider ways to improve IAF quality