A Study On Financial Fraud Of Backdoor Listing From The Perspective Of Fraud Triangle Theory

Backdoor listing is a popular way to mergers and acquisitions in China's securities market,which is also an important approach to optimizing resource allocation and achieving survival of the fittest.Under the context of comprehensive and strict regulatory policies,due to its short review time and easy procedures,backdoor listing is still favored by many companies,especially those with limited funds.According to the statistics of the RoyalFlush database,in the past 5 years,from 2014 to 2018,there have been 116 cases of backdoor listings,where 77 cases have been successful,and the success rate of backdoor listings has reached 66.38%.With the massive outbreak of the financial scandal of the China Stock Exchange,the financial fraud of the backdoor listing began to receive high attention from the society.Under the temptation of the huge benefits that the listing may bring,some of the listed companies that are unable to meet the regulatory requirements tend to take risks to implement fraud.Since the company's main business,actual controllers and other information will undergo maj or changes after the listing of the backdoor,the nature of the fraudulent behavior of the reorganization party is not inferior to the fraudulent issue.Regardless of whether the backdoor party will eventually succeed or not,it will damage the legitimate interests of investors,which have destroyed the resource allocation and economic orientation of the capital market and have become a "cancer" that hinders the healthy development of the economy.Consequently,it is of theoretical and practical significance to study how to prevent financial fraud of listed companies.Jiuhao Group's backdoor listing financial fraud case is the first major case that broke out after the promulgation of the new regulations in 2016.The novelty of fraud,various methods of fraud and high concealment make it the typical cases of "flickering"restructuring which deserves concerns and reflections of general public.This paper selects this case as the research object and conducts a comprehensive and in-depth analysis based on the perspective of triangle theory.Firstly,the article summarizes the research on the backdoor listing,financial fraud,prevention and governance,and then based on the concept of financial fraud happening in the backdoor listing,the paper introduces the fraud triangle theory and lays a theoretical foundation for case analysis.By reviewing the background of the backdoor listing of the Jiuhao Group and the whole process of fraudulent incidents,this paper firstly analyzes in detail the company's fraudulent means to achieve high asset valuation and beautify the performance via inflating business income,inflating bank deposits and undisclosed borrowings and bank deposit pledge,and conclude that the financial fraud of the backdoor listing has a dual purpose and a wide range of participants.On this basis,starting from the three factors of pressure,opportunity and excuses,this paper deeply summarizes the reasons why Jiuhao Group implemented financial fraud in the context of backdoor listing,which can be roughly classified into:under pressure of the strong demand for listing financing and the individual's pursuit of private income,the opportunities created by non-standard internal governance mechanisms and imperfect internal control mechanisms,after weighing the risks and benefits of fraud,using the seemingly legitimate excuse like"fastening the scale of the company" to cover up its unscientific management and the irrational view of interests,and the behavior like taking risks to implement financial fraud,which ultimately result in a "flickering" restructuring.Finally,specific prevention and control measures are proposed in three directions:reducing fraud risks,reducing fraud opportunities,and eliminating fraudulent excuses.This is a wake-up call for other backdoor listed companies or Internet intermediary platform companies,and how big accounting firms can be a "gatekeepers" in the securities market during the era of big data and emerging business models.It also provids reference for the prevention and anti-fraud behaviors of the regulatory agencies,and promotes the long-term development of "no need,no,no willingness".