Research on the Applicability of MScore and FScore Models to U.S.-Listed Chinese Stocks

DOI

10.2991/978-94-6463-036-7_50How to use a DOI?

Keywords

Financial fraud; Chinese concept stocks; MScore Model; FScore Model

Abstract

In recent years, the U.S. Securities and Exchange Commission (SEC) has also launched an increasing number of investigations into accounting fraud by U.S.-listed Chinese companies. According to the statistics, from year 2000 to year 2020, a total of 464 Chinese concept stock companies entered the American capital market, raising a total of 74.1 billion dollars through its IPO. Luckin Coffee is undoubtedly one of the most talked about Chinese stocks recently. Earlier, the well-known short-selling agency Muddy Waters released a short-selling report on Luckin Coffee, accusing its financial report of fraud. Such a common phenomenon of Chinese concept stocks fraud makes our group want to explore whether MScore and FScore can be used to predict whether there is financial fraud. Our group used the same year's MScore and FScore to compare the non-counterfeiting companies in the same industry and the accused cost company and found that both MScore and FScore Model’s performances on predicting financial fraud is not that well no matter from industry aspect or time aspect. There are two main reasons for this phenomenon 1) due to the differences in Chinese and American accounting standards, the financial statements of Chinese enterprises are not completely disclosed in accordance with the American accounting standards; 2) the enterprise is headquartered in China, which causes the enterprise to operate according to the Chinese rules and regulations, and the operation mode, profit mode, tax mode and other modes.

Copyright

© 2022 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Xiaotian Ye
AU  - Zeyu Cheng
AU  - Xinyu Geng
AU  - Chengyu Zhu
PY  - 2022
DA  - 2022/12/31
TI  - Research on the Applicability of MScore and FScore Models to U.S.-Listed Chinese Stocks
BT  - Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)
PB  - Atlantis Press
SP  - 329
EP  - 341
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-036-7_50
DO  - 10.2991/978-94-6463-036-7_50
ID  - Ye2022
ER  -