Game-Theoretic Analysis On Financial Reporting Fraud Of Listed Companies

Chinese stock market has developed for more than 10 years. Being a new market, however, there are kinds of problems in its development, such as the market systems, related laws and regulations are still in the processes of building and bettering, which are especially serious in the aspect of Financial Reporting Fraud of listed companies. The events of false information revelation appeared time and again in the recent years, which bring the unprecedented credit crisis in stock market. The credit foundation of stock market and the principle of open, justice, fair are challenged. How to overcome this problem radically is an important issue with practical and theoretical value to both government and financial departments.This paper introduces the game theory into the research on the problem of the Financial Reporting Fraud. Emphasizing on game theory, we construct a four-player model of Financial Reporting Fraud, get NASH equilibrium resolution and do final comprehensive analysis. Furthermore, this article discusses the countermeasures to prevent false information and to enhance the regulation efficiency.In this paper, we start with the basic definition of Financial Reporting Fraud, analyze the fraudulent financial statements of listed companies that were punished by CSRS. We conclude the regulations and fundamental contents in Chinese listed companies by the analysis on exiting problems, outcomes and consequences. Then we choose four aspects to be the principal parts of Financial Reporting Fraud. Emphasizing on game theory, we construct a four-player model of Financial Reporting Fraud, get NASH equilibrium resolution and do final comprehensive analysis. In the case study of YINGGUANGXIA, we explain the deep reasons and summarize the procedures and lessons.Finally, we propose the practical strategy of Financial Reporting Fraud and suggest that a Financial Reporting Fraud System be set up by combination of supervising department, listed companies, accounting agency and investors.