Case study of the conglomerate bankruptcy scandal in Taiwan (The Rebar Group)

[摘要] In Taiwan, big companies are basically family-owned enterprises. They begin with a primary industry or a secondary manufacturing industry, and then reach out to a tertiary sector, providing services in various industries. Family businesses use cross-shareholding and affiliation to legally solidify their ownership of listed companies. In addition, they build close relationships with the government or a political party for years, which leads to some unspoken privilege or special benefits. However, diversification and strategic alliances can hide serious financial risks in companies. For example, the Rebar Group;;s bankruptcy case in 2007 caused severe financial turmoil in Taiwan and drew people;;s attention to affiliated companies. My research will focus on the context of the Rebar Group;;s bankruptcy case and the lessons we can learn from the case to avoid any future financial crisis. With the use of only public information from 2001 to 2005, a deep dive fundamental analysis of two main affiliated companies in the group will be conducted. Before the analysis, the Beneish M-Score will be used to see the possibilities of earning manipulation. In addition, there are several financial formulas to evaluate corporate credit risks, including the Altman Z-Score and the Ohlson O-Score. In my research, these models will also be used to see whether the case could have been effectively detected earlier.

[发布机构] Massachusetts Institute of Technology