Research On The Causes Of Financial Fraud In Cross-industrial Mergers And Acquisitions Based On Grounded Theory

With the deepening of economic globalisation and the development of the internet economy,industry boundaries are becoming increasingly blurred and cross-border M&A has become the primary way for companies to quickly enter other industries,rapidly capture market share and realise their diversification strategy.However,cross-border M&A has inevitable drawbacks such as insufficient understanding of the industry to correctly judge its development prospects and lack of a stable supply and marketing chain.The integration of M&A resources and the management and operation of the target company after M&A pose higher requirements for M&A companies.When absorbing other enterprises through M&A,enterprises need to conduct sufficient investigation into the subject enterprises,otherwise they may acquire undesirable enterprises with financial problems,which will not only fail to get better development,but also affect the corporate image of the parent company and even cause operational crisis.This paper focuses on cross-border mergers and acquisitions to form subsidiaries and the financial fraud committed by the subsidiaries,using a combination of theoretical analysis and case studies,with the acquisition of Chang Yuan and Eagle by Chang Yuan Group as a specific case.Firstly,the relevant literature on business combinations and financial fraud published in the world today is selected,and the relevant parts of it are reviewed and summarised,and the latest developments in the industry on the topic of this paper are grasped,and the core concepts mentioned therein are defined,so as to clarify the theoretical basis of corporate financial fraud.Secondly,the case subjects are introduced,including the company profiles of both parties,the history of the financial fraud and the means of financial fraud.Again,the root cause of the financial fraud of the subsidiary is analysed inductively using the root study method,and the three core areas of demand,internal control failures and external regulatory loopholes are summarised to form a logic diagram of the core areas,which further elaborates the impact of the core areas on the financial fraud and the intrinsic links between them.Finally,conclusions are drawn from the analysis and relevant recommendations are made for the governance of financial fraud incidents in subsidiaries formed by cross-border mergers and acquisitions.This paper finds that the demand of companies and their management is the motivation for financial fraud,while internal control failures and external regulatory loopholes provide opportunities for companies to commit financial fraud.External regulatory loopholes include judicial regulatory loopholes and third-party audit loopholes,while external regulatory loopholes can amplify demand and weaken the role of internal control,the existence of demand can also weaken the role of internal control,and the failure of internal control can in turn meet demand.This paper enriches the research related to financial fraud in cross-border M&A and provides reference for listed companies to strengthen the internal control of their subsidiaries and for external institutions to strengthen their supervision.