"If the trade war continues to escalate as Trump has threatened, there's going to be a big impact on the capital markets... I expect that we're going to see a winter in IPOs next year."
Paul, you've gotten to this point where you've become this guru for all issues related to accounting in China. How did that journey come about?
I came to China 21 years ago. I was transferred here by the international accounting firm PriceWaterhouseCoopers. It was Price Waterhouse at the time. I was in China with them for seven years. Then I took early retirement from PwC and I tried playing golf for a while, but got bored with that. So I went back to school. I first studied theology. I enjoyed the academic side of it, so I decided to get a PhD in accounting. I chose, as my topic for my dissertation, the development of the accounting profession in China.
One of the things that I discovered in my research was that there were gaps in the regulation of Chinese companies that were starting to rush to U.S. stock exchanges in the early 2000s. Those gaps in regulation were likely to lead to an environment where there might be a lot of fraud. I predicted it would happen in my doctoral dissertation. About the time I finished it, it all came true. There were over 100 cases of fraud brought against overseas-listed Chinese companies. My work came to the attention of the Public Company Accounting Oversight Board (PCAOB), which asked me to serve on their standing advisory group. And also a lot of hedge funds and other market participants got interested in what I had to say.
My blog, The China Accounting Blog, got quite a bit of attention. After a while, basically, everybody who was following the China stock market was reading what I was writing. That has led to me being, probably, the leading Western expert in Chinese accounting and auditing problems for overseas -listed Chinese companies.
2018 has been a banner year for Chinese IPOs thus far, with 23 Chinese companies going public on the U.S. stock markets in the first nine months. In the technology sector, Chinese innovators are outpacing American companies in the race to the opening bell. And there is a gathering herd of Chinese “unicorns” with multi-billion dollar valuations and strong backing from large private equity funds waiting for their turn to tap the public markets.
An Interview with Howard Schilit
Howard Schilit is America’s foremost scholar of the accounting tricks that public companies use to make their financial performance appear more enticing than the underlying reality.
His seminal work, Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud in Financial Statements, is required reading for financial analysts and aspiring fund managers. But like the prophet without honor in his own country, Schilit’s work has been strangely ignored in his own profession of accounting. MarcumBP’s Drew Bernstein sat down with Howard to learn about the latest in accounting skullduggery and why every auditor should be schooled in the fine art of financial fraud.
More than eight years into the current stock market rally, professional equity bears have become an endangered species on Wall Street. And yet when I had the chance to sit down with famed short seller James Chanos last week, he was friendly, open, and highly optimistic about the opportunities to practice his tradecraft of sniffing out skunky accounting and malodorous business models.
Following the Party Congress, Is China on Path to Global Ascendancy or a Nasty Bust?
And Drive Any Professional Services Firm Into the Ground
Over the past twelve months, accounting scandals have tarnished some of the most illustrious corporate names and embarrassed some of the putatively smartest investors on Wall Street.
By Drew Bernstein
In 2016 China emerged as the world’s most active player in cross-border M&A, with $225.4 billion of outbound deals, more than doubling the prior record of $102 billion in 2015 according to Dealogic. While the pace of dealmaking has slowed in 2017 as the government seeks to stanch the outflow of capital, China has arrived as a major player. The types of assets Chinese buyers are seeking has shifted from primarily energy and resource plays a few years ago to now focus on globally recognized brands and advanced technologies.
Given the very powerful demographic dynamics in China, we should expect that healthcare is likely to become one of the most active sectors for both M&A and innovative partnerships in the years to co