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Research on fraudulent behavior in Vietnam's stock market - 2


LIST OF TABLES

Table 2.1: Qualitative research methods 74

Table 2.2: Typical insider trading situations 75

Table 2.3: Typical scenarios of price manipulation 77

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Table 2.4: Typical situations of false information disclosure 80

Table 2.5: Typical situations of adjusting or falsifying records and documents 81

Research on fraudulent behavior in Vietnam's stock market - 2

Table 2.6: Typical scenarios of intertwining types of fraudulent behavior 82

Table 2.7: List of in-depth interview subjects 84

Table 2.8: Opinions on grouping opportunity factors into 3 groups of factors 85

Table 2.9: Opinions on the use of methods to commit fraud 85

to identify fraudulent behavior 85

Table 2.10: Results of in-depth interview opinions on independent variables 86

Table 2.11: Results of in-depth interview opinions on dependent variables 88

Table 2.12: Oriented research methods 89

Table 2.13: Independent variable scale 91

Table 2.14: Dependent variable scale 93

Table 3.1: Summary of opportunity factors leading to fraudulent behavior from case studies117 Table 3.2: Summary of ways to commit fraudulent behavior from case studies..118 Table 3.3: Assessment of the reliability of the scale through Cronbach's Alpha coefficient 120

Table 3.4: Results of EFA factor analysis 121

Table 3.5: KMO test and Bartlett test of dependent variable 121

Table 3.6: Extracted variance values ​​of dependent variable 122

Table 3.7: Rotation matrix in EFA analysis for dependent variable 122

Table 3.8: Reliability assessment of the new scale 123

Table 3.9: Correlation coefficients between variables in model 123

Table 3.10: Results of regression analysis of factors of independent variables 124

Table 3.11: Autocorrelation test 124

Table 3.12: F 125 test results

Table 3.13: Variances test with gender group 128

Table 3.14: ANOVA test with gender group 128

Table 3.15: Variances test with education level group 129

Table 3.16: ANOVA test with education level group 129

Table 3.17: Variances test with surveyed group of 129

Table 3.18: ANOVA test with surveyed group of 130 subjects

Table 3.19: Statistics on fines for fraud in the stock market 2008 - 2019 133

Table 3.20: Statistics of fraudulent acts in the Vietnamese stock market 2007 - 2019 139


LIST OF FIGURES, CHARTS AND DIAGRAMS


Figure 1: Research framework on fraudulent behavior in the stock market 5

Figure 1.1: Fraud Triangle 25

Figure 2.1: Research process 73

Figure 2.2: Model of opportunity factors leading to fraudulent behavior in the Vietnamese stock market 90

Figure 2.3: Survey design process 95

Figure 3.1: Vnindex from 2000 - 2019 100

Figure 3.2: SKG stock price movement from May 1, 2017 - September 30, 2017 104

Figure 3.3: CDO stock price fluctuations from March 9, 2015 - October 25, 2017 106

Figure 3.4: Process of creating fake contracts at DVD 115

Figure 3.5: Gender chart of survey subjects 119

Figure 3.6: Chart of educational level of surveyed subjects 119

Figure 3.7: Group chart of surveyed subjects 120

Figure 4.1: Proposed management process 159

Figure 4.2. Coordination model between agencies and departments 169


INTRODUCTION

1. Urgency of the topic


The first recorded case of stock market manipulation was the Tulip Bulb scandal in 1636 in the Netherlands. The number of frauds increased in the 17th and 18th centuries, especially during economic crises. Insider trading is often not proven because it is difficult to prove what the defendant actually knew at the time the transaction was made. The US Securities and Exchange Commission (SEC) was also embarrassed by a scandal involving insider trading by two SEC enforcement officers (Stephen, 2014). Price manipulation is also becoming more sophisticated, complex, and involves many parties. Rejesh's (2003) empirical study in the US market shows that there are fraudulent acts that harm the market but are not regulated, there are fraudulent acts that are not detected and investigated, and there are cases that are investigated but there is not enough evidence to prosecute. Therefore, regulatory and enforcement laws must be constantly improved and kept up with the market because as long as profit-making opportunities exist, fraud is likely to continue (Rezaee & Riley, 2010). Fraud in the stock market has many negative consequences including negatively affecting the company's stock price, causing damage to shareholders, employees, vendors and customers, and as a result, reducing the company's ability to raise capital (Lord (2010), Rezaee & Riley (2010), Murphy & Tibbs (2010)). Fraud not only causes direct economic damage, it also leads to litigation costs, insurance premiums, loss of confidence and distortion of the investment market (Peterson & Buckhoff (2004), Rezaee et al. (2004)). According to the Association of Certified Fraud Examiners (ACFE, 2010), “fraud causes losses of up to 7% of annual revenue for businesses, causing the US economy to lose about 6% of its gross domestic product in 2004 (equivalent to 10,000 billion USD), which means that each year the economy loses over 600 billion USD. This is a very large number because it is almost double the budget that the US Government spent on military activities in 2003. And it is more than the money the Government invested in building infrastructure and education, exceeding 28 times the budget the Government prioritized for crime prevention in 2003”.

Despite the existence of many methods and predictive indicators, fraud is still difficult to detect. As Rezaee & Riley (2010) stated, not only researchers but also managers have a more important task of preventing fraud from occurring, therefore, it is necessary to



carefully analyze the reasons for its occurrence and the techniques that can be performed. One of the important factors is to analyze the opportunities and loopholes for fraudulent behavior to be performed. The fraud triangle theory is often used to determine this factor. Research results around the world have shown that one of the important causes leading to fraudulent behavior is the existence of loopholes that create opportunities for fraudulent behavior to be performed (Cressey (1953), Demsetz (1968), Cornell & Sirri (1992), Chakravarty & McConnell (1997), Kenyon & Tilton (2006), Dorminey et al. (2010), Ewa & Udoayang (2012)).

In Vietnam, since its official operation (since 2000), fraudulent acts in the stock market have become increasingly sophisticated and complicated. Although legal documents are increasingly strict, inspection and examination measures are widely deployed, especially the application of the criminal code to crimes in the securities sector, fraud continues to increase in number and severity. In the period 2010 - 2020, the State Securities Commission (SSC) issued an average of 240 penalty decisions annually with a fine of 15.7 billion VND/year. However, detecting and handling these transactions still faces many technical and legal difficulties. In addition to the violations that have been detected and handled, in reality there are many violations that do not have enough evidence to be punished (Duong Nguyen (2008), Nguyen The Tho (2014), Truong Minh Huy (2015), Vinh Nguyen & associates (2017)). The State Securities Commission has transferred 3 cases to the police for investigation and they were returned even though the signs of insider trading were clear but the evidence was insufficient, especially market manipulation and insider trading activities that are quite common but do not have enough evidence, so they are often shown as violations of information disclosure, so the penalties are lighter, not commensurate with the severity of the fraudulent acts. Many serious incidents leading to losses for thousands of investors over a long period of time show many loopholes in management and supervision by authorities such as the case of falsifying records and documents of securities offering by MTM, the case of manipulating the price of CDO, DVD securities... Therefore, continuing to research fraudulent behavior in the stock market to propose solutions to strengthen the management of fraudulent behavior is urgent for the sustainable development of the stock market. As Benjamin Franklin (1735) said, "An ounce of prevention is worth a pound of cure." The top priority for management agencies is to have measures to prevent fraud instead of reacting and dealing with the consequences of fraud.

There have been many studies on fraud in the stock market around the world, however, the studies mainly focus on developed markets that have data.



rich data for quantitative results. In Vietnam today, there is still no scientific work with enough convincing theory, model, and research data on fraudulent behaviors in the stock market.

For the above reasons, the topic "Research on fraudulent behavior in the Vietnamese stock market" is an urgent research direction both in theory and practice .

2. Research objectives

The general research objective of the thesis is to identify the opportunistic factors leading to fraudulent behavior in the Vietnamese stock market in order to propose solutions to strengthen State management of fraudulent behavior in the Vietnamese stock market. The specific objectives are identified as follows:

(1) Basic issues of fraudulent behavior in the stock market

(2) Basic issues in managing fraudulent behavior in the stock market

(3) Analysis of the current situation of opportunity factors leading to fraudulent behavior in the Vietnamese stock market

(4) Analysis of the current status of management of fraudulent behaviors in the Vietnamese stock market.

(5) Propose solutions for the State Securities Commission to strengthen management of fraudulent acts in the Vietnamese stock market.

3. Research questions

(1) What are the ways to commit fraud in the stock market?

(2) What are the opportunistic factors that lead to fraudulent behavior in the stock market?

(3) How do fraudulent acts affect investors, listed companies and the stock market?

(4) What contents, methods and tools are there for the state to manage fraudulent acts in the stock market?

(5) Characteristics of fraudulent behavior in the Vietnamese stock market?

(6) What are the opportunistic factors leading to fraudulent behavior in the Vietnamese stock market?

(7) What is the impact level of opportunity factors leading to fraudulent behavior in the Vietnamese stock market?



(8) Is there a difference in perception of fraud behavior among experts by gender, education level, and survey subjects in the Vietnamese stock market?

(9) What contents, methods and tools does the State have to manage fraudulent acts in the Vietnamese stock market?

(10) What solutions are there for the State Securities Commission to strengthen the management of fraudulent acts in the Vietnamese stock market?

4. Research object and scope

Research object

Fraudulent behavior and State management of fraud in the underlying securities market. Due to data limitations, the research subjects do not include fraudulent behavior in the derivative securities market or fraudulent behavior that overlaps two markets and does not include cross-border fraudulent behavior.

Scope of research

Time range:

The study used data for the period from 2010 to 2019. Spatial scope:

Research on fraudulent behaviors and state management of fraudulent behaviors in the Vietnamese stock market.

Within the scope of the research, fraudulent behavior in the stock market is approached from the management perspective of the State Securities Commission. In which, the fraud triangle theory is applied to clarify the opportunistic factors leading to fraudulent behavior to propose solutions to help strengthen the management of fraudulent behavior in the Vietnamese stock market.

The thesis focuses on studying fraudulent behaviors including Insider Trading; Price Manipulation; Disclosure of false information; Adjustment or falsification of securities documents and records. Because these fraudulent behaviors are common in the Vietnamese stock market, they are closely related to each other and share common groups of opportunistic factors leading to fraudulent behavior.


5. Research framework

Based on the objectives and research questions, the research framework of the Thesis is established in Figure 1 below:


Research Overview


Determine NC clearance


Research question


Theoretical framework


- Efficient market theory

- Behavioral finance theory

- Signal theory

- Fraud Triangle Theory


Research methods

Qualitative research

- Case study

- In-depth interviews with experts

Quantitative research

- Descriptive statistics

- Exploratory factor analysis (EFA)

- Regression model analysis


Analyze and discuss research results


Figure 1: Research framework on fraudulent behavior in the stock market

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