A Study On Regulation Of Corporate Fraud

Frequent occurrences of corporate fraud in recent years are serious problems which dampen the confidence of shareholders,damage the interests of the investors and hinder the development of capital market,including failure of important information disclosure,failure to perform duties according to law,false information disclosure or misleading statement,inaccurate or unseasonal of achievement forecast and fail to disclose periodic reports in time.This study investigates on the causes and economic consequences of corporate fraud so as to get some effective revelations for restraining corporate fraud.This paper take Jiangsu Baoli International Investment Company Limited's corporate fraud in voluntary disclosure as a case,analyzing motive of corporate fraud with the target of external,internal environment,corporate governance and getting to conclusions that corporate fraud is significantly related to macro environment,investor confidence,fierce competition in the industry,poor profitability,solvency,insufficient cash flow and minor punishment.Take abnormal return,calculative abnormal return and abvolume as indices to value the market reaction,and find out that it is significantly reflected in stock price and taken as bad news.It shows the validity of regulation.The sustained reduction of institutional shareholders,the losses of business and bank credit indicate the economic consequences that the corporate has to take.Though it seemed that the cost is far more less than benefit in corporate fraud,it will increase the cost anyhow by market return in the long run.From individual case to common ones,through the analysis of the situation of listed companies,this paper further studies the influence of the situation of the industry,the financial situation of the company and the governance structure on corporate fraud of the listed companies,and by combining the analysis of the regulation for the situation,we can draw to conclusions of policy suggestions for corporate fraud.The suggestions are as follows:Firstly,severe punishment should be handed out and the amount of penalty should be improved.At present,the supervision measures of the listed companies are limited and the punishment is slight which cannot effectively restrain the violation,while in fact plays a counter role in a form similar to illegal taxes or illegal fees.We should strengthen the implementation ratio of severe punishment measures,improve the fine,and increase the confiscation of illegal income reasonably and flexibly.It will play a strong deterrent role in the violation of enterprises,fight against the illegal gains of enterprises,and increase the losses of enterprises violate regulations,thus reduce the frequent irregularities in the market.Secondly,the enhancement of supervision on the high competitive or weak industry should take into consideration.Due to the numerous corporate frauds exist in the manufacturing industry,the probability of violation in high output and high energy consumption industries has increased.Since supervision resources are limited,we have to focus on industries that are high competitive or in weak state so as to achieve better regulatory effectiveness with lower costs.Thirdly,it is recommended to reinforce self-regulation and bring market validity into full play to restrain the violation.It is urged to develop self-regulation mode of stock exchanges,make the self-discipline associate play its role and improve the efficiency of supervision.Limited heteronomy supervision resources release can be released to cases that are complicated and detrimental to the market by combining the market and the government organically.Fourthly,we may establish an early warning mechanism based on corporate governance,taking financial status and governance structure of the company as indicates to accomplish a comprehensive,systematic and flexible early warning mechanism,and also increase the punishment of the controller involved in the cases so as to increase their losses and combat their illegal actions.Fifthly,the improvement of reporting violation system for intermediaries is a must.We can take use of their professionalism and intimate contact with the company,and find illegal behaviors in advance.We can improve the reporting mechanism,smooth the channel,give corresponding rights and supervise their obligations.Sixthly,strengthen the continuous disclosure of penalties to corporate fraud is highly recommended.It is suggest that we may increase the length of the disclosure of violations,the broad scope and the density of publicity.In these ways,we can increase the deterrent effect on those corporations.What's more,we can combat enterprise irregularities through the follow-up multi linkage,and the warning for the market would be strengthened.Finally,we need to perfect the recourse mechanism by clearing the responsibilities and authorities of the market supervision,and furthermore defining the civil and criminal liability that the listed companies should bear.By set up a long-term prosecution and collective litigation mechanism for investors,we can protect the interests of outside investors,and maintain the good operation of the economic system.