Financial Fraud And Corporate Governance

Since the stock market has been founded in 1991, it has given a strong arm to the development of our country' s marketing economy as we can see. And for the reason of establishing the modern enterprise system, many state-owned enterprises(SOEs) have changed their internal structure to enter the stock market, and have played an key role in the economy.During the past decades, the stock market of China has been growing with the time passing by. But at the same time, the corruptions of listing companies are more and more serious. The majority of the companies are the state-owned list companies. In my opinion, the reason is the deficient of the corporate governance system in China.The theory of corporate governance is concentrated from the following four theories: Principal-Agency, Internal Control Mechanism, Incentive & Constrain Scheme&Efficient Market Hypothesis. In this paper which based on the theory, I analyze the bottom reason of list company' s financial cheat in China in both internal and external respect of corporate governance. In the internal respect, the ownership system of the SOEs cannot be regarded as part of efficient corporate governance system. Besides this, because china' s stock market has developed only for thirteen years, there are a lot of problems that prevent the regulatory agency exerting an influence on the actions of the corporations.Then, I express my attitudes on how to eliminate the finance fraudulent practices in the stock market. For China, the most important issue is to develop institutions that are conducive to effective corporate governance in order to improve the efficiency of its corporations.