MEASURES TO PREVENT LISTED FIRMS FROM BEING EMPTIED: THE CASE OF TAIWAN

Year 2018, , 1 - 12, 30.03.2018

Lih-torng Chen Sz-meng Yang Chiu-chi Wei

https://doi.org/10.17261/Pressacademia.2018.812

Abstract

Purpose- Enterprises
are major elements of the national economy that provide employment
opportunities and innovative products that improve quality of life. They also
pay tax to promote national construction. Therefore, the legal operation of
enterprises gives stability to a society. 
However, due to various reasons, domestic and global fraud occurs and
emptying a company does most harm. Emptying means depleting a company’s assets
by illicit means.

Methodology-
Previous studies on this issue focus mainly on
one facet of the problem, such as a company’s legal responsibility, the
financial consequences, the strengthening of governance, the deployment of
ethics or information transparency.  Very
few studies examine measures to prevent listed companies from being emptied
from the perspective of regulation, control and autonomy.  This study uses a Modified Delphi Method and
30 experts to extract a consensus of measures to avoid fraud, in terms of
government regulation, accountant validation and enterprise autonomy. The method
uses three rounds and the results show that the most effective means is for
government to establish a law that forces criminals to give back the spoils and
for enterprise to regularly receive training of board members on governance.
The second effective means is to establish a law that provides reward and
protection for informants and for enterprises to disclose the salaries of board
members. The third effective means is for government to establish an
institution that is responsible for fraud, to require company transparency and
to require accountants to use combined financial reports for mutual investment
to discover fake investments.

Findings- Careful
examination of the top three effective measures shows that even though some of
the methods are related to accountant validation and enterprise autonomy, their
complete execution must rely on legislation. 
Therefore, it is clear that government regulation is the key to avoiding
fraud.

Conclusion- Active
regulation by the government is more effective than passive autonomy in
enterprises. This conclusion is the result of deliberations by an expert panel
that was composed of senior management, prosecutors and judges and accountants,
so it is a company basis for legislative action.

Keywords

Empty out, governance, ethics, fraud, enterprise value

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