Corporate fraud in the Vietnam upcom stock market: a case study of the central mining, mineral exporting and importing company

Abstract

The Central Mining, Mineral Exporting and Importing Company (MTM) is the typical case that illustrates clearly the situation of agency cost and fraudulent behaviors in the Vietnam Upcom stock market. The first part reveals the weaknesses of regulation and current policies in Vietnam by using the principal-principal agency perspective of Young (2008) particularly with regard to the mechanisms of stock scanning, no controlling the changes of regulated capital, the undemanding capital contribution and no legal responsibilities of former majority shareholders. The second part of thesis uses the modified fraud of triangle of Soltani (2014) as a theoretical framework with several adjustments to adapt the current circumstance of MTM. The case of MTM shows a number of fraudulent behaviors by controlling shareholders including: (1) The reconstruction of human resource before listing; (2) Having no major shareholder - holding more than 5% of the chartered capital - but the power is concentrated; (3) Using the brand and pictures makes confusion with another company; (4) Increasing the regulated capital in the short term; (5) No core business or production, mainly the joint venture or capital contribution; (6) The external audit accepted despite of the fact that financial statements have the problems; (7) The business situation is not good but the price and volume of stock trading is still high; (8) Tax obligation and social insurance are not completed. In conclusion, the thesis strongly recommends the policies to reduce the likelihood of expropriation of minority shareholders due to the principal-principal agency conflicts and these fraudulent behaviors.