Publication Type

Journal Article

Version

submittedVersion

Publication Date

6-2018

Abstract

Since the Asian financialcrisis of 1997, Hong Kong and Singapore have implemented reforms that promote independenceand monitoring competency of the boards of directors of their listed companies.However, with the advent of the financial crisis of 2007/2008, a wave of fraudcases prompts the question as to the effectiveness of these reforms. Analysing asample of 62 listed companies which are found to have committed fraud between2007 and 2014, and comparing against a matched sample of no-fraud companies, wefind that the fraud companies tend to either combine the roles of chairman andchief executive officer (or they are close family members) and have fewer non-accountingfinance experts on their boards. They are also likely to be overseas mainlandChinese firms. Analysing the specific case studies of fraud, the reasons forthe lack of effectiveness in the independent directors in preventing fraud are likelydue to the difficulties in obtaining access to information in approvingconflicted transactions, low threat of enforcement actions, their incentives toside with controlling shareholders and the challenges in regulating foreignlistings.

Keywords

Corporate fraud, independent directors, corporate governance, foreign listings

Discipline

Asian Studies | Business Law, Public Responsibility, and Ethics

Research Areas

Corporate, Finance and Securities Law

Publication

Hong Kong Law Journal

Volume

48

Issue

1

First Page

125

Last Page

166

ISSN

0378-0600

Publisher

Hong Kong Law Journal Ltd.

Additional URL

https://ssrn.com/abstract=3165829

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