"A Small Leak Will Sink A Great Ship": *ST Poten's "Butterfly Effect" of Mandatory Delisting Due to Financial Fraud

DOI: https://doi.org/10.62517/jbm.202509107

Author(s)

Danran Zhou, Xiaohui Xing, YuYuan Fu

Affiliation(s)

College of Accounting, Tianjin University of Commerce, Tianjin, China

Abstract

This paper scrutinizes the financial fraud perpetrated by Poten Environment, delving into the consequential impact of financial information quality on market ecology. Upon going public, Poten Environment was coerced into sustaining its listing status and fulfilling financial obligations, which precipitated not only pronounced legal repercussions for the company but also a "butterfly effect" across myriad stakeholders. The investigation reveals that the company's deceptive practices led to a diminished excess return rate for enterprises within the same sector, engendered negative investor sentiment, depreciated corporate value, and induced skepticism regarding the integrity of auditing firms. This case serves as a salient reference for comprehending the market reactions and ramifications stemming from financial fraud in listed entities. Listed companies are imperatively required to refine their governance structures and bolster internal controls, while regulatory bodies must amplify their oversight endeavors and augment the efficacy of law enforcement; moreover, investors are exhorted to heighten their risk consciousness to safeguard the robust development of the capital market.

Keywords

Financial Fraud; Butterfly Effect; Investor Behavior; Audit Institutions; Capital Market Regulation.

References

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