Corporate Fraud & Regulation

The financial crisis of 2007/2008 triggered a wave of financial fraud cases, particularly amongst Chinese private enterprise firms listed in Hong Kong and Singapore. These firms are characterised not only by having founding shareholders or families retaining significant control but also their assets, businesses and their senior management are located in China (that is, outside the jurisdiction of listing).

Do the fraudulent companies have board characteristics that are different from the non-fraudulent firms? Are foreign listings more likely to commit fraud as compared with domestic listings? Why has fraud occurred among the domestic and foreign listings despite the fact legal reforms have purported to strengthen the independence of the boards in both jurisdictions?

Professor Wan Wai Yee and Assoc/Prof Christopher Chen, from the SMU School of Law, highlight insights from their research in corporate fraud.

Additionally, in a study on squeeze-out transactions in Hong Kong and Singapore, they investigate how the two countries diverge in terms of regulation and outcomes, despite adaptation of corporate and securities laws from the UK.

Wan Wai Yee
Research Interests: Corporate Law; Securities Regulation; Law of Mergers and Acquisitions

Faculty profile: https://law.smu.edu.sg/faculty/profile/9600/WAN-Wai-Yee

Christopher Chen
Research Interests: Law regarding financial derivatives; Banking and insurance regulations; Comparative corporate law and corporate governance

Wan, Wai Yee, Chen, Christopher C. H, Xia, Chongwu, & Goo, Say. (2018). Managing the Risks of Corporate Fraud: The Evidence from Hong Kong and Singapore.

Available at:

Since the Asian financial crisis of 1997, Hong Kong and Singapore have implemented reforms that promote independence and 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 fraud cases prompts the question as to the effectiveness of these reforms. Analysing a sample of 62 listed companies which are found to have committed fraud between 2007 and 2014, and comparing against a matched sample of no-fraud companies, we find that the fraud companies tend to either combine the roles of chairman and chief executive officer (or they are close family members) and have fewer non-accounting finance experts on their boards. They are also likely to be overseas mainland Chinese firms. Analysing the specific case studies of fraud, the reasons for the lack of effectiveness in the independent directors in preventing fraud are likely due to the difficulties in obtaining access to information in approving conflicted transactions, low threat of enforcement actions, their incentives to side with controlling shareholders and the challenges in regulating foreign listings.

Chen, Christopher, Zhang, Wei, and Wan, Wai Yee. (2018). Regulating Squeeze-out Techniques by Controlling Shareholders: The Divergence between Hong Kong and Singapore. Journal of Corporate Law Studies. 18, (1), 185-216.

Available at:

Squeeze-out transactions are controversial as the controlling shareholders may expropriate the minorities’ shareholdings at unattractive prices. Existing scholarship has focused on the optimal approach towards regulating such transactions in the United States (US) and the United Kingdom (UK), which have widely dispersed public shareholdings, but little attention has been placed on jurisdictions with concentrated shareholdings, which may necessitate a different approach given that the prospects of expropriation are very high. This article fills the gap by examining Hong Kong and Singapore, which have concentrated shareholdings. Notwithstanding the fact that they have adapted their corporate and securities laws from the UK, Hong Kong ultimately provides greater minority shareholder protection than Singapore. We present empirical evidence that the differences in regulation have led to a smaller number of squeeze-outs but higher premiums payable to minority shareholders in Hong Kong, as compared to Singapore. However, Hong Kong firms experience higher levels of related party transactions prior to the squeeze-outs, which represent another form of tunnelling. We explain the differences in regulation and discuss the normative implications of our findings. Our study contributes to the broader literature that ‘law matters’ and provides case studies of how interest group politics shape the evolution of laws and regulation.

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corporate fraud, independent directors, corporate governance, foreign listings,