A Case Study Of Financial Fraud By Shell Restructuring

The rapid development of China's economy has led many private enterprises to foresee the prospect of a mature Chinese capital market,which they eager to raise large amounts of funds and develop the company rapidly by the means such as OPI.However,the IPO market in China has established a high entry standard and a strict approval process,which requires a long waiting period.Thus the backdoor listing having lower approval requirements has become the first alternative for those urgently needed for listing.The review procedure of backdoor listing is relatively simple and short,and requires lower in competition with the same industry as well as business contacting with related parties.If the company can grasp the timing of the listing in a timely manner,regardless of whether the overall financial market is performing well or not,they can complete the backdoor listing successfully and efficiently.Backdoor listing also has its unique risks,which makes it necessary to be focused on the selection of shell company,the collection of information,the reasonable operation of financial data and the dominant direction of company manager.And it is these difficulties that lead the company's financial fraud and inflating enterprise value for the purpose of listing.From the perspective of the world's environment,there are numerous cases of financial fraud in the capital market,whether it is the mature US market or the just-started domestic market.The relevant departments are constantly improving the regulatory system,in the meanwhile financial frauds are becoming more complex and hidden,which challengeing the regulatory bottom line.By reviewing the literature on the status of backdoor listing fraud,this paper firstly introduces the background and significance of the research and explains the objectives and innovations briefly.In the second part,combining the case of financial counterfeiting listed by the Nine-Top Group,we sort out their process of backdoor listing and describe the financial fraud happened during the process.Next,we will focus on the motivations of financial fraud as well as that of backdoor listing for transferees,and study the specific means of financial fraud by backdoor listing in aspects of the case subject and the intermediary agency.Then,we make recommendations in term of examining transferor's financial data,managing transferee's resource,selecting intermediary agency and improving the regulatory system respectively,which is helpful for enterprises to identify and make precaution against the financial fraud during the backdoor listing.Some opinions for regulators about supervision of the financial situation before listing also are put forward.Finally,the shortcoming of this paper and the prospect of further research are summarized.We hope to compensate the lack of theoretical literature and financial fraud cases in China backdoor listing to some extent.For the later researchers,we make a supplement to the analysis of the means of financial fraud in backdoor listing and make a reasonable explanation in terms of theory and the current market status.The Jiu-Top Group financial fraud case is the first one happened along platform logistics hosting service companies.The means of financial fraud in the Jiu-Top Group make the two parties and the intermediary agency all involved in the illegal chain of fraud.It is worth pondering for people because the amount of money is huge and the influence is bad.Most studies of the traditional case are divided into two directions,that is,backdoor listing and financial fraud.This paper mainly focuses on the financial methods for whitewashing statements and inflating assets during backdoor listing,and we dissect the direction of financial fraud of platform companies and key subjects,while conducting financial analysis of the means of fraud that are different from those in the traditional industries and putting the conceptual theories into practice.