In the recent past the Chinese IPOs have been accused of fraud. Chinese IPOs which listed in the US stock exchange are drawing flak from the investors due to fraud related issues. There is a lot concern about the business models of the firm and their growth expectation. There is little control in financial aspects of the firms and they are not transparent in the disclosures they make it to the investors. This has led to the Chinese companies being the worst performer if a comparison is done of the IPOs in US. There have been many investigations which have been done and which are ongoing related to transactions and fraud done by the Chinese counterparts (Chen, Firth & Kim, 2004).
In order to understand the reason behind these turn of events it is necessary to understand how the IPO market has evolved in China. In the 1990s when there was dominance of the communists who are capitalists in China to launch IPOs in the US market, the firms which mostly raised money were manufacturing firms which followed old line of business, firm involved in the utilities business and firm manufacturing bicycles. However in the latter part of 1990s decade the US market saw large issuance of the telecom companies which were looking for privatization. These companies in the initial stages received a positive response from the investors but later on these firms did badly as they were not able to keep with the standards which were needed to maintain for the public listed firms (Ito, 2003).