Case Analysis Of NANTEX Financial Fraud Based On GONE Theory

With the development of our country's economy,the capital market is gradually maturing.China's capital markets also have a problem of financial fraud of listed companies,which is not only affects the impression of listed company,but also having a particularly negative effect on the capital market.Investigate the fraud management methods of Chinese listed companies has important theoretical value and practical significance.GONE theory holds that the incidence of financial fraud must have four factors at the same time: greed,opportunity,need and exposure.Missing any of the four factors can not constitute financial fraud.Among the four factors,greed factor focus on the influence of moral quality of managers,need factor explain the financial fraud from the perspective of organizations,they are the internal causes of financial fraud.Opportunity factor and exposure factor explain the financial fraud from the perspective of company's internal mechanism and external supervision,they are the external causes of financial fraud.NANTEX is a Chinese state-owned company.Because of some historical reasons,the shares structure of our country's state-owned listed companies,which is very unique,not only has no advantages of the modern enterprise but also is lacking in the internal control and supervision mechanism.Compared with the previous financial fraud,the problems of NANTEX are more representative.This paper use of GONE theory to analysis the company's financial fraud,will be helpful to promote the healthy development of securities markets.From the perspective of the individual,the greed of individuals generally refers to the expansion of the rights and the enhancement of controlling.NANTEX's managers transfers the ownership of state property into the hands of private individuals and hidden reserves for their own profit.From the perspective of the organizations,the listed companies need to retain the shell resource and sustain growth.In the case of import and export volume both fell sharply,NANTEX vigorously expand investment scale that result the over-investment behavior,but a majority of the invested enterprises were found to be lossmaking,the huge fund demand lead to financial fraud.From the perspective of company's internal mechanism,inadequate corporate internal governance structure could promote the financial fraud.NANTEX is a state-owned listed company,the disadvantages of “Absence of owners”and administrative appointment system is particularly obvious,“Insider control” is theintuitive reflection.From the perspective of company's external supervision,lack of independence of certified public accountants and the absence of the external supervision system both reduce the risk of exposure.When the cost of fraud is lower than the benefits of fraud,administering authority will choose to financial fraud.Based on the above analysis of four dimensions,we propose the following prevention advice.Firstly,create an atmosphere of cultivating culture,establish an effective constraint incentive mechanism,make the employees more focus on the long-term development of the enterprise.Secondly,expand financing channels and establish a reasonable market evaluation system to solve financing difficulty of enterprise.Thirdly,promote equity diversification,execute degree of separation of two rights and establish an effective internal control system.Finally,change the audit market structure and improve the delisting mechanism system and investors claim mechanism,increase the opportunity cost of financial fraud.