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The Spillover Effect of Fraud Allegations Against Chinese Reverse Mergers

The Spillover Effect of Fraud Allegations Against Chinese Reverse Mergers
Author: Masako N. Darrough
Publisher:
Total Pages: 55
Release: 2015
Genre:
ISBN:
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We examine the spillover effect of fraud allegations against Chinese companies that became public through reverse mergers (CRMs) instead of IPOs. Both short sellers and regulators took active interests in the frauds allegedly perpetrated by CRMs. Once the public became alarmed by the frequency of these alleged-fraud revelations, the stock prices of both the offending and non-offending Chinese companies (both CRMs and IPOs) tumbled. The intensity of this negative spillover effect increased with short selling activities, suggesting that short sellers played an important role. Since US-listed, non-Chinese RMs have escaped the wrath of investors, the market reaction appears to be based on the country of origin rather than the method of going public. The wide-spread spillover effect on seemingly non-fraudulent companies indicates a serious credibility gap for Chinese companies in general, calling for coordinated actions by the Chinese and US regulators to restore investors' confidence.

Spillover Effect of Fraud Allegations and Investor Sentiment

Spillover Effect of Fraud Allegations and Investor Sentiment
Author: Masako N. Darrough
Publisher:
Total Pages: 49
Release: 2017
Genre:
ISBN:
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We examine whether a stock price spillover effect spreads through the method of listing or country of origin and whether this spillover effect changes when investor sentiment shifts. Using a sample of fraud allegations against Chinese companies that became public through reverse mergers (CRMs), we first investigate whether firms suffering from negative stock price spillover effects are those with the same method of listing or from the same country as firms that have been accused of fraud. We find that the stock price spillover effect spreads through the firm's country of origin only after investor sentiment about Chinese companies worsens significantly, as evinced by significant declines in the stock prices of non-fraudulent Chinese companies, including both CRMs and Chinese IPOs. Second, we find that the intensity of the stock price spillover effect increases with short-selling activities. Our findings indicate that: 1) investor sentiment plays a significant role in the spillover process involving fraud allegations; and 2) the country of origin appears to be the primary while the method of listings appears to be the secondary mechanism of the negative spillover effect when both the country and RM spillover effects exist.

GAAP Difference Or Accounting Fraud? Evidence from Chinese Reverse Mergers Delisted from U.S. Markets

GAAP Difference Or Accounting Fraud? Evidence from Chinese Reverse Mergers Delisted from U.S. Markets
Author: Yimiao Chen
Publisher:
Total Pages: 25
Release: 2015
Genre:
ISBN:
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In 2012, one in four federal securities class-action lawsuits filed in the U.S. involved Chinese Reverse Merge companies (CRMs). However, these lawsuits sometimes have encountered difficulties in court due to insufficient direct evidence of accounting fraud. We propose a new method for fraud detection: use Chinese companies dual-listed in the U.S. and China to establish a benchmark for the normal GAAP difference between the two countries. Using this methodology, we find that only a small fraction of the discrepancies between delisted CRMs' financial statements filed in the U.S. and those filed in China can be attributed to GAAP difference. This suggests that the remaining discrepancies, which are large and unexplained, are indeed due to accounting fraud. Therefore, it is reasonable to conclude that delisted Chinese Reverse Merger companies enticed U.S. investors with favorable and fraudulent accounting and financial data.

The Oxford Handbook of IPOs

The Oxford Handbook of IPOs
Author: Douglas Cumming
Publisher: Oxford University Press
Total Pages: 504
Release: 2018-11-15
Genre: Business & Economics
ISBN: 0190614587
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Initial public offerings (IPOs), or new listings of companies on stock exchanges, are among the most important form of finance and generate considerable attention and excitement. They are used to raise capital or to monetize investments by the early generation of venture capital and other private investors. They are increasingly international in scope and reach, especially with non-American firms offering on American stock exchanges. This handbook provides a comprehensive overview of why companies list on stock exchanges, how IPOs are regulated, initially valued, and their performance in the short and long run. The first part examines the economics of IPOs, and offers statistics and regulatory insights from the United States and other countries around the world. The volume then covers mergers versus IPOs, as well as reverse mergers and special purpose acquisition companies. Part III analyzes institutional ties in IPOs, including analysts, investment banks, auditors, and venture capitalists. The fourth section provides international perspectives on IPOs from a number of countries around the world. Part V discusses alternatives to IPOs, including private marketplaces, and crowdfunding. Reflecting the range of disciplines that analyze IPOs, the contributors come from the fields of finance, international business and management, economics, and law. The chapters cover the latest information on a range of fundamental questions that are of interest to academics, practitioners, and policymakers alike.

Corporate Governance Improving Corporate Governance in Indonesia Policy Options and Regulatory Strategies for Tackling Backdoor Listings

Corporate Governance Improving Corporate Governance in Indonesia Policy Options and Regulatory Strategies for Tackling Backdoor Listings
Author: OECD
Publisher: OECD Publishing
Total Pages: 44
Release: 2016-07-15
Genre:
ISBN: 9264243976
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This report provides four regulatory strategies for consideration by policy makers in Indonesia, in order to support their efforts to improve listing and corporate governance standards.

Reverse Mergers

Reverse Mergers
Author: David N. Feldman
Publisher: John Wiley & Sons
Total Pages: 305
Release: 2010-05-20
Genre: Business & Economics
ISBN: 0470883480
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In good markets or bad, reverse mergers play a key role for companies that want to avoid the IPO route for going public. Since the successful first edition of Reverse Mergers was published in 2006, the economic and regulatory landscape has changed. Executives, owners, lawyers, accountants, professional investors, regulators, and others need to know what those changes mean for reverse mergers. Reverse-merger expert David Feldman gives an overview of the most important changes since the previous edition was published: new SEC regulations, the changing nature of SPACs (Special-Purpose Acquisition Company), and the emergence of new instruments called WRASPs (WestPark Alternative Senior Exchange Process). The book includes a new chapter on China, and the “Experts Speak” chapter features all new interviewees. David Feldman is one of the country’s leading experts on reverse mergers, self-filings, and other alternatives to IPOs. His firm has guided hundreds of companies on going public, advising them on structure and mechanics, financing, due diligence, regulatory issues, and more.

The Financial Crisis Inquiry Report

The Financial Crisis Inquiry Report
Author: Financial Crisis Inquiry Commission
Publisher: Cosimo, Inc.
Total Pages: 692
Release: 2011-05-01
Genre: Political Science
ISBN: 1616405414
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The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.

Corporate Fraud Exposed

Corporate Fraud Exposed
Author: H. Kent Baker
Publisher: Emerald Group Publishing
Total Pages: 323
Release: 2020-10-09
Genre: Business & Economics
ISBN: 1789734193
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Corporate Fraud Exposed uncovers the motivations and drivers of fraud including agency theory, executive compensation, and organizational culture. It delves into the consequences of fraud for various firm stakeholders, and its spillover effects on other corporations, the political environment, and financial market participants.

Handbook of Research on IPOs

Handbook of Research on IPOs
Author: Mario Levis
Publisher: Edward Elgar Pub
Total Pages: 578
Release: 2013
Genre: Business & Economics
ISBN: 9781781955369
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The Handbook of Research on IPOs provides a comprehensive review of the emerging trends and directions in the global initial public offerings (IPO) markets. The empirical evidence included in the book covers Europe, the US and the Far East, and presents a truly global perspective of IPO markets around the world and at the different stages of the entire IPO process.The Handbook is divided into six comprehensive parts:* why, when and where firms go public* preparation for the IPO* transaction structure and governance at the IPO* trading in the aftermarket* the aftermarket performance of IPOs* special types of IPOs. The chapters offer some important new insights into issues that will be of interest not only to the academic community but also to professionals involved in the preparation, structure and execution of such transactions, market regulators, and private and institutional investors.