Case Study On IPO Fraudulent Issuance And Supervision Of The Xintai Electric

On October 30,2009,Growth Enterprise Market(GEM)was listed on the Shenzhen Stock Exchange.The purpose of the establishment was to raise a large amount of funds for innovative companies,small and medium-sized enterprises,and high-tech industrial companies to solve the problem of corporate financing.However,due to the short establishment time of the GEM and the particularity of its listing criteria,it has caused some vulnerabilities in the terms of supervision,which results in the frequent occurrence of IPO fraudulent issuance in the GEM.Dandong Xintai Electric Co.,Ltd.was listed on the GEM of the Shenzhen Stock Exchange on January 27,2014.Due to false records and major omissions in the periodical reports disclosed after the issuance of IPO frauds and listing,it received the “The Decision of Administrative Penalty” and “The Decision of Market Entered” from the CSRC in July 2016,and launched compulsory delisting procedures.Therefore,it became the first company in the GEM that was forcibly delisted and permanently delisted because of fraudulent issuance.The thesis will analyze the case of Xintai Electric's IPO fraudulent issuance and supervision cases in order to help and protect the interests of small and medium investors,improve the supervision of the GEM,and prevent the occurrence of fraudulent issuance cases again.The thesis combines theory with case analysis.The theoretical part introduces the concept of IPO,fraudulent issuance and GEM,the motivation theory of fraudulent issuance,the methods of IPO fraudulent issuance,the impact of IPO fraudulent issuance and the game theory.At the same time,it introduces the main contents of supervision of the GEM.including supervision of IPO audit,fraudulent issuance and information disclosure.In the case study section,we first briefly introduced the basic situation of Xintai Electric,also the IPO fraudulent issuance event,methods,progress and punishment results.Secondly,the thesis analyzes Xintai Electric's IPO fraudulent issuing from its IPO fraudulent issuance motives,methods,consequences,and insufficient supervision of Xintai Electric was launched.The theory of “Fraud Triangle” has been used to analyze the motives of the IPO fraudulent issuance of Xintai Electric,and Xintai Electric and the regulator are analyzed in detail using game theory.Xintai Electric's IPO fraud is mainly due to the fact that after the listing,it is able to obtain huge benefits,the internal management of the company is insufficient,and the competitiveness of the company is not strong.The company uses the means of reducing the accounts receivable,making less provision for bad debts,etc.to make false statements in the share offerings.At the same time,due to the serious imbalance between cost of manipulation and benefits received,IPO audit mechanism and imperfection of information disclosure in the GEM,the regulatory problems of laws and regulations and civil compensation mechanism have increased the probability of the IPO fraudulent issuance.Lastly,through the case analysis,four suggestions are available for reference,specific include: optimizing shareholding structure,improving the functions of the board of directors and the board of supervisors;strengthening supervision of intermediaries and regulators;making IPO audit system,IPO information disclosure system,prior payment system and laws and regulations become perfect;increasing the illegal cost,strengthening education for small and medium investors,strengthening local government supervision functions,establishing a multi-level supervisory system.