Shenyang Chemical (SZ:000698) Zhong Guo Jing Ying Bao·2025-11-29 09:00Core Viewpoint - The Shenyang Chemical case highlights significant risks associated with financial misconduct at subsidiaries, which can severely impact the parent company's financial integrity and market trust [4][5][6]. Summary by Sections Financial Misconduct Details - Shenyang Wax Chemical, a wholly-owned subsidiary of Shenyang Chemical, engaged in financial fraud from 2018 to 2021 by manipulating production input quantities and delaying inventory recognition, leading to false financial statements [1][2]. - The fraudulent activities resulted in inflated profits of CNY 130 million, CNY 204 million, and CNY 104 million for the years 2018, 2019, and 2020 respectively, while the 2021 report showed a profit reduction of CNY 148 million [2]. Regulatory Actions - The Liaoning Securities Regulatory Bureau imposed a total fine of CNY 15.7 million on Shenyang Chemical and four responsible individuals, with specific penalties including CNY 7 million for the company and CNY 3.5 million for the chairman [3]. - Several executives received warnings and fines, with two individuals facing market bans of 8 years and 4 years respectively [3]. Implications for Corporate Governance - The case underscores the systemic risks posed by subsidiary financial issues, which can distort the parent company's financial health and erode market confidence [5][6]. - The involvement of multiple levels of management in the misconduct indicates severe deficiencies in corporate governance and internal controls [6]. Recommendations for Improvement - Experts suggest enhancing legal regulations, improving corporate governance, and strengthening regulatory enforcement to mitigate such risks [7]. - Companies should implement strict vertical financial management and internal control systems for subsidiaries, ensuring that financial personnel appointments and assessments are led by the parent company [7].