Research on fraudulent behaviors on the Vietnam’s stock market

n. (1997) found that men had a higher perception of fraudulent behaviors than women. 7 - Most studies show that people with education level of higher education or higher have a higher perception of fraudulent behaviors, they are able to identify how to commit fraudulent behaviors in practice (Sabau (2013), Jonas & Lukas (2013)). People with lower qualifications have difficulty observing the market, limiting their ability to identify or avoid fraudulent behaviors (Jonas & Lukas (2013)). - Research by Copeland & Galai (1983), Kyle (1985), Easley & O'Hara (1987), Barber et al. (2001), Wei Wu (2015), said that, securities broker, stock market manager have higher perception of fraudulent behaviors than investors. However, Agnew & Szykman (2005), Elliott et al (2008) pointed out that experienced investors are aware of fraudulent behaviors like brokers, stock market managers. 1.7.2 Research works in Vietnam 1.7.2.1 Ways of implementing fraudulent behaviors on the stock market Syndissertation of studies by Nguyen Thanh Tung (2016), Nguyen The Tho (2014), Le Nguyen Trung Thanh (2017), Vinh Nguyen et al (2017) ... show that, ways of committing fraudulent behaviors on the stock market include: Continuously purchasing and selling securities creates artificial supply and demand for securities; Continuously transacting with dominant volume; Offering opinions either directly or indirectly to disseminate investment trends in order to influence the price of that security; Creating and publishing false or misleading information that greatly affects securities prices in the market; Using insider information that has not been published in securities transactions. 1.7.2.2 Opportunity factors leading to fraudulent behaviors on the stock market Group of opportunity factors issued by insiders and issuers Syndissertation of studies by Vo Thi Hoang Nhi (2008), Ta Thu Trang (2017), Tran Thi Giang Tan et al (2014) .... shows that group of opportunity factors issued by insiders and organizations includes: Persons with unpublished internal information about the company; collusion of the issuer; Insiders and securities companies; Important people in the company abuse power, position; Issuers with transactions of related parties, An issuer has a complex organizational structure; Issuer does not control inside information well. Group of opportunity factors issued by investors Syndissertation of studies by Nguyen Cuong (2017), Mai Phuong, 2011); Nguyen Thanh Tung (2016) ... shows that group of opportunity factors issued by investors include: Investors do not analyze carefully the information of the issuer; Investors tend to trade securities according to insiders; Investors tend to trade securities according to foreign 8 investors; Investors trade according to the recommendation of the brokerage company; Investors trade according to advisory information on stock forums. Group of opportunity factors issued by market managers and supervisors Syndissertation of studies by Nguyen Dung (2005), Vo Thi Hoang Nhi (2008) .....shows that group of factors of opportunity by market managers and supervisors includes: The fraud detection surveillance system of state agencies has not been timely; The legal system still has many shortcomings; Sanctions are too light and not deterrent; Sanctioning measures are not timely. 1.7.3 Identification of research gaps On the basis of an overview of domestic and foreign research, the author identifies the following gaps that need research: - Researches in the world analyze fraudulent behaviors on the stock market with different time periods and territories with different types of fraudulent behaviors, but there are no studies to synthesize methods of committing fraudulent behaviors and synthesizing opportunity factors leading to fraudulent behaviors on the stock market. - Researches in Vietnam have not used data that is large and diverse enough to objectively identify fraudulent behaviors on the stock market. - Studies in Vietnam mainly focus on fraudulent financial statements, have not had any intensive researches, have not applied any research theory or research model on insider trading and stock price manipulation. - In Vietnam, there are not many intensive studies on fraudulent behaviors on the stock market, a few studies on the differences in perception of fraudulent behaviors by experts by gender, education level, surveying objects but focused on fraudulent financial statements in the field of accounting and auditing. - Studies from the perspective of state management agencies on the stock market mainly focus on monitoring criteria without analyzing the contents, methods and tools to manage fraudulent behaviors. 9 CHAPTER 2 RESEARCH METHODOLOGY AND RESEARCH MODEL 2.1 Research process Step 1: Overview of ways to commit fraudulent behaviors on the stock market (dependent variable) and opportunity factors leading to fraudulent behaviors on the stock market (independent variable). Step 2: Synthesizing secondary data of the SSC to list various types of fraudulent behaviors. At the same time, through analyzing typical situations, listing the opportunity factors and ways of committing fraudulent behaviors. From there, building survey note for intensive interviews with experts. Step 3: Conducting intensive interviews with experts to confirm or remove or add scales to complete the surveynote before it is widely distributed. Step 4: Conducting a survey and collecting and processing data. Step 5: Analyzing the contents, methods, tools and the current management situation of the State Securities Commission for fraudulent behaviors on Vietnam stock market Step 6: On the basis of analyzing the quantitative and qualitative results, proposing solutions. 2.2 Qualitative research method 2.2.1 Typical case research method 23 typical situations are selected to analyze opportunity factors, methods of committing fraudulent behaviors and state management of fraudulent behaviors on the stock market. 2.2.2 Method of intensive interview with experts Semi-structured intensive interviews with 30 experts to select, add or remove opportunity factors and methods of committing fraudulent behavior on Vietnam's stock market, from which to complete the survey note. 2.3 Quantitative research method Table 2.12: Quantitative research methods Method Target Descriptive statistical method Statistics of fraudulent behaviors on Vietnam's stock market Exploratory Factor Analysis (EFA) Exploring the opportunity factors leading to fraudulent behavior on Vietnam's stock market. Regression model analysis Determining the impact of opportunity factors leading to fraudulent behavior on Vietnam's stock market. 10 2.3.1 Descriptive statistical method From the records of the State Securities Commission, the author totals up and classifies fraud, total number of sanctioning decisions, total fine .... in the period 2010 - 2019 2.3.2 Survey investigative method 2.3.2.1 Research model and research hypodissertation The research model is set up as follows: FRD = f (ISD, IVT, MNG) In which: FRD (Fraud): form of fraud; ISD (Insiders): opportunity variable issued by insiders and issuers; IVT (Investors): opportunity variable by investors; MNG (Manage): opportunity variable by market managers and supervisors. Research hypodissertationes: H1: The group of opportunity factors issued by insiders and issuers has impact on fraudulent behavior on Vietnam's stock market; H2: The group of opportunity factors issued by investors has impact on fraudulent behavior on Vietnam's stock market; H3: The group of opportunity factors issued by market managers and supervisors has an impact on fraudulent behavior on Vietnam's stock market; H4: There is a difference in experts' perceptions of fraudulent behavior by gender; H5: Experts' perceptions of fraudulent behavior by education level; H6: There is a difference in perception of fraudulent behavior among experts according to surveying objects. 2.3.2.2 The scale of variables Table 2.13: Independent variable scale Variabl e code Measurement indicator Source I Opportunity group issued by insiders and issuers ISD1 Person with unpublished internal information about the company Carlton & Fischel (1983), John & Lang (1991). ISD2 Collusion of the issuer, insider and securities company Klein (1995), Rajesh (2003), Klein & et al (2010) ISD3 Abuse of power, position. Cressey (1953), Singleton & et al (2006), Ewa & Udoayang (2012). ISD4 When asked by friends or acquaintances, they can be in friends or acquaintances' name of the company but do not contribute capital or run the company Supplement from case study and intensive interviews. 11 Variabl e code Measurement indicator Source ISD5 Issuer with transactions of related parties, parent company - subsidiary Ming & Wong (2003), Wilks & Zimbelman (2004). ISD6 An issuer has a complex organizational structure with one person holding multiple positions. Loebbecke & et al (1989), Lou & Wang (2009). ISD7 Issuer does not control inside information well Jeng (1998), Loebbecke & et al (1989), Noe (1999) II Opportunity group due to lack of understanding of investors, investment according to the psychology of the crowd IVT1 Investors do not carefully analyze information of issuers such as prospectus, notes of financial statements ... Glosten & Milgrom (1985), Easley & O'Hara (1987). IVT2 Investors let friends and acquaintances borrow securities accounts Supplement from case study and intensive interviews. IVT3 Investors purchase and sell securities according to insiders or are believed to have inside information Demsetz (1968), Chakravarty & McConnell (1997). IVT4 Investors tend to trade according to foreign investors Results from case study and intensive interviews. IVT5 Investors trade on the recommendation of the broker Allen & Gale (1992), Dorminey & et al (2010), Rajesh (2013). IVT6 Investors trade according to advisory information on stock forums Results from case study and intensive interviews. III Opportunity group issued by ineffective market manager and supervisor MNG1 "credit to create leverage" services of securities companies Supplement from case study and intensive interviews. MNG2 The government agency's fraud detection surveillance system is not timely Kenyon & Tilton (2006), Dorminey & et al (2010). MNG3 The legal system still has many shortcomings, omits or improperly assesses the type of crime, no appealer policy ... Rajesh (2003), Bhattacharya & Daouk (2009), Bartlett (2012). 12 Variabl e code Measurement indicator Source MNG4 Sanctions are too light and not deterrent Choi (2004), Bhattacharya & Daouk (2009). MNG5 The sanctioning measures are not timely or delayed Results from case studies and intensive interviews. MNG6 Competence of the SSC in inspection, examination and sanction is still limited Supplement from case study and intensive interviews. Source: Author's syndissertation Table 2.14: Dependent variable scale Variabl e code Measurement indicator Source Ways to commit fraud FRD1 Using one or more accounts to continuously purchase and sell creates artificial supply and demand for securities. Kyle (1984), Rajesh (2003), Back & Baruch (2004). FRD2 Continuous trading with dominant volume at the time of determining closing price or new opening price of that securities. Back & Baruch (2004), Archisman & Bilge Yilmaz (2004). FRD3 Making opinions through the media about a security in order to influence the price of that security Foster & Viswanathan (1994), Van (2003), Back & Baruch (2004). FRD4 Creating and disclosing false information affecting securities prices on the market Kyle (1984), Klein (1995), Rajesh (2003). FRD5 Using unpublished inside information to trade securities. Carlton & Fischel (1983), Banerjee & Eckard (2001). 2.3.2.3 The process of implementing the survey method The survey process is done through the following steps: (1) Determining the sample, (2) Designing the survey note according to the 5-level Likert scale, (3) Conducting the survey. 13 Figure 2.3: The process of designing survey note 2.3.2.4 Data processing process Total number of collected votes is 657 votes. The total number of valid votes to be used is 568 votes. Survey results are handled by SPSS program CHAPTER 3 THE REALITY OF FRAUDULENT BEHAVIORS AND THE STATE MANAGEMENT OF FRAUDULENT BEHAVIORS ON VIETNAM'S STOCK MARKET 3.1 Outline of Vietnam's stock market development Vietnam's stock market has gone through 20 years of establishment and development, liquidity has been improved day by day, market organization is more and more perfect, goods are increasingly diversified. Vietnam's stock market in the coming time is ready to accept opportunities and challenges, to meet international integration requirements and sustainable development goals. 3.2 The reality of fraud on Vietnam's stock market 3.2.1 Case study of fraudulent behaviors on Vietnam's stock market Studying insider trading situations; price manipulation situations; situations of disclosing false information; situations of modifying or falsifying records, documents; situations interspersed with many fraudulent behaviors. From there, synthesizing the opportunity factors leading to fraudulent behaviors and ways to commit fraudulent behaviors. Results of research overview in the world and in Vietnam Results of research on typical situations on the stock market Results of intensive interviews with experts on Vietnam's stock Developing survey note and testing to 30 surveyed people Completing the survey note and widely issuing the survey note 14 Table 3.1: Synthetizing the opportunity factors that lead to fraudulent behaviors from a case study Opportunity factor issued by an insider or issuer - Insiders and people who have unpublished internal information - People with important positions in the company abuse power, entice employees, others to commit fraudulent behaviors. - Collusion of interest groups including major shareholders, issuers, corporate managers and securities companies. - The issuer has many unusual and complicated transactions. - The issuer with related party transactions. - The issuer has a complicated organizational structure. - The issuer does not manage the internal information well Opportunity factor due to lack of investor understanding or crowd psychology - Investors did not carefully analyze the information - Lending stock accounts to friends and acquaintances. - In friends and acquaintances' name to go to business but do not contribute capital or operate. - Investors trade securities by insiders - Investors trade by the crowd Opportunity factor due to ineffective management of the stock market - "Credit" services beyond the regulations of the securities companies. - The fraud detection monitoring system is not timely - The forms of sanctions are too light and not deterrent - The legal system still has many shortcomings Source: Tác giả tổng hợp Bảng 3.2: Tổng hợp các cách thức thực hiện hành vi gian lận từ nghiên cứu tình huống TT Cách thức thực hiện hành vi gian lận 1 Dùng một hay nhiều tài khoản để liên tục mua, bán tạo ra cung, cầu giả tạo cho CK. 2 Liên tục giao dịch với khối lượng chi phối tại thời điểm xác định giá đóng cửa hoặc giá mở cửa mới của CK đó. 3 Đưa ra ý kiến thông qua phương tiện thông tin đại chúng về một loại CK nhằm tạo ảnh hưởng đến giá của loại CK 4 Tạo dựng, công bố thông tin sai lệch hoặc gây hiểu lầm ảnh hưởng lớn đến giá CK trên thị trường 5 Sử dụng thông tin nội bộ chưa công bố để giao dịch CK Nguồn: Author's syndissertation 15 3.2.2 Factor analysis uncovers the opportunity factors leading to fraudulent behaviour on Vietnam's stock market 3.2.2.1 Surveying sample description Of the 568 survey notes, there were 58.45% of men, 41.55% of women. Of which 93.48% have university degrees or higher, 6.5% of surveyed people have college, high schools degrees. 48.77% of people work in securities, the rest 51.23% are investors with more than 5 years of experience. 3.2.2.2 Evaluating the reliability of the scale Cronbach's Alpha coefficients of all variables were> 0.7. However, the ISD4 indicator has Cronbach's Alpha coefficient if item delete is 0.809> Cronbach's Alpha coefficient of the ISD variable is 0.802. The MNG1 indicator has Cronbach's alpha coefficient if item delete is 0.858> Cronbach's Alpha coefficient of MNG variable is 0.832, so ISD4 and MNG1 are removed. Table 3.3: Evaluating the reliability of the scale through Cronbach's Alpha coefficient No. Variable Symbol Cronbach’s Alpha coefficient 1 Ways to commit fraud FRD 0,754 2 Opportunity variable issued by insiders and issuers ISD 0,809 3 Opportunity variable issued by investors IVT 0,758 4 Opportunity variable issued by market managers and supervisors MNG 0,858 Source: Synthesized from analysis results 3.2.2.3 EFA analysis for the independent variable At the first time of EFA analysis, indicators IVT1, IVT2 with factor load coefficient <0.5 and indicators ISD5, MNG2, MNG3 did not guarantee convergence values of the same factor, so the study removed the 5 above indicators. The second analysis result qualifies for analysis. Table 3.4: Results of factor analysis EFA EFA analysis KMO coefficient P- value Citation variance Factor load coefficient Conclusion 1st time 0,877 0,000 61,116 All >0,5 Removes 5 indicators 2nd time 0,817 0,000 60,595 All > 0.5 Qualified for analysis Source: Synthesized from analysis results 16 3.2.2.4 EFA analysis for the dependent variable Analysis of discovery factor EFA for the dependent variable showed that the KMO coefficient is 0.756 (> 0.5). Sig. value is 0.000 (<0.05), the variance extracted is 50,503 (> 50%), and the indicators are combined into a single variable, ensuring "convergent value" requirement. 3.2.2.5 Evaluating the reliability of the new scale The results of Cronbach's Alpha test analysis of the new variables are > 0.7. The MNG6 indicator has Cronbach's Alpha if Item Deleted coefficient of 0.858> Cronbach's Alpha coefficient of the variable MNG (0.806). However, the qualitative research results show that this is an important indicator in the variable "Opportunities from market manager and supervisors". Therefore, the study retains MNG6. Table 3.8: Evaluating the reliability of the new scale No. Variable Symbol Cronbach’s Alpha coefficient 1 Opportunity variable issued by insiders and issuer ISD 0,781 2 Opportunity variable issued by investor IVT 0,756 3 Opportunity variable issued by market manager and supervisor MNG 0,806 Source: Synthesized from analysis results 3.2.2.6 Analyzing PEARSON correlation among variables Correlation analysis results show that due to the coefficient Sig. (2-tailed) <0.05, so all variables have independent effects on fraudulent behaviour on the stock market, and there are quite a close correlation among variables. Therefore, to ensure the level of accuracy, it is necessary to rethink the role of the independent variable on the multivariate regression model by considering the influence of each independent variable on the dependent variable and checking multicollinearity of the model. 3.2.2.7 Regression model analysis Table 3.10: The results of regression analysis on the factors of the independent variable No. Independent variable B Beta standardized regression coefficient Sig. VIF magnification coefficient (Constant) 1,470 0,000 1 ISD 0,377 0,413 0,000 1,366 2 IVT 0,072 0,079 0,035 1,188 3 MNG 0,164 0,211 0,000 1,406 Source: Synthesized from analysis results 17 All Sig value. are <0.05 and positive Beta standardized regression coefficient prove that all independent variables included in the model have positive effects on the dependent variable. Regression equation is obtained: FRD = 1,470 + 0,377*ISD + 0,072*IVT + 0,164*MNG Hypotheses H1, H2, and H3 are accepted. The results of regression analysis show that there is no multicollinearity phenomenon because the VIF magnification coefficients are all less than 2. This proves the accuracy of the results of model testing and collected data. The Durbin - Watson coefficient is 2.124 for a regression model (in the range from 1 to 3), proving that the model has no autocorrelation. Also, sig. value the class correlation between the standardized residuals (ABSRES) and the independent variables are equally> 0.05, so the residual variance is homogeneous, no error variance occurs. Table 3.12: F-test results ANOVAa Model Sum of squares Degree of freedom Squared average Statistics F Significance level of Sig. test 1 Regression 97,260 3 32,420 97,170 0,000b Residual 188,173 564 0,334 Total 285,433 567 Sig. value of the F-test in ANOVA is 0.000 <0.05, the building regression model is extensible and applicable to the whole. 3.2.2.8 Analysis of research results The group of opportunity factors that have the greatest impact on fraudulent behaviour on the Vietnam's stock market is from insiders and issuers, followed by the group of factors "Ineffective market management and supervision" and finally is "an investor who lacks understanding, investing according to the psychology of the crowd". Hypotheses H1, H2, and H3 are accepted. 3.2.2.9 Verifying experts' perceptions of fraudulent behaviour by gender Sig. value of variances test is 0.406> 0.05, eligible to use the results of the ANOVA test. Sig. value of the ANOVA test is 0.008 <0.05. Therefore, it can be concluded with a significance level of 5% that there are perceptions about fraudulent behavior among experts by gender. The hypodissertation H4 is accepted. ANOVA's intensive analysis shows that, with an average value of perceptions of fraudulent behaviour of 3,6284 for Men higher than 3,4675 for Women, it can be confirmed that male experts are aware of in terms of fraudulent behaviour is higher than that of women. 18 3.2.2.10 Verifying experts' perceptions of fraudulent behaviour by education level Sig. value of the Variances test is 0.329> 0.05, eligible to use the results of the ANOVA test. Sig. value of the ANOVA test is 0.632> 0.05. Therefore, it can be concluded that with a significance level of 5%, there is no difference in the fraudulent behavior of the experts' perception of fraudulent behavior by educational level, hypodissertation H5 is rejected. 3.2.2.11 Verifying perception difference about fraudulent behavior of experts who are investors and people working in the securities sector Sig. value of the Variances test is 0.180> 0.05, which qualifies using the ANOVA test result. Sig. value of the ANOVA test is 0.088> 0.05. Therefore, it can be concluded that with the significance of 5%, there is no difference in fraud behavior of experts who are investors and experts in the securities sector, hypodissertation H6 is rejected. 3.3 The State Securities Commission's management status over fraudulent behaviors on Vietnam's stock market 3.3.1 Management agencies on Vietnam's stock market 3.3.2 Current status of content, management methods and tools Table 3.19: Statistics of the fines for fraudulent behavior on the stock market in the period 2008 - 2019 Fraudulent behavior Number of handled violations 200 8 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 Total number of sanctioning decisions (5) 124 158 371 166 179 108 121 150 133 349 371 452 Total fine (billion Vietnamese dong) 3,8 4,1 15 11 11 8 10 12 12,3 30,4 20 28,1 Source: State Securities Commission 3.3.3 Statistics of detected and handled fraudulent behaviour Table 3.20: Statistics of fraudulent behaviors on Vietnam's stock market in the period 2017-2019 Fraudulent behavior Number of handled violations 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Violation of the issuer (1) 56 94 115 74 81 67 44 50 44 56 122 74 101 Insider trading 1 1 1 2 0 0 0 0 0 0 1 0 0 19 Price manipulation 2 2 4 10 14 2 7 2 4 6 6 9 8 Violation of information disclosure by major shareholders, internal shareholders (2) 17 16