Identification and Regulation of Related Party Transaction Fraud under Performance Commitment Pressure: A Case Study of Aerospace Communications

With the implementation of the registration system, the activity in mergers, acquisitions, and reorganizations in the capital market has increased, and the “Performance Commitment” centered put-option agreements have become widespread. However, the fraudulent behavior of some companies using related-party transactions to embellish their financial statements has occurred frequently, seriously damaging the interests of investors. The article, therefore, examines the connected transactions of Hipad Intelligent Technology Co., Ltd., a subsidiary of Aerospace Communications, as the research object. Using GONE Theory, principal-agent theory, and case analysis method, a framework for “Fraud Identification - Motivation Analysis - Governance Plan” was constructed to explore the motives and countermeasures of fraud in connected transactions. Research findings indicate that Aerospace Communications’ fraud is attributable to multiple factors: performance commitment pressure serves as the original driving force, the interest impulses of controlling shareholders and management exacerbate greed motives, corporate governance deficiencies and information asymmetry provide operational opportunities, and low illegal costs reduce the risk of fraud exposure; Hipad Intelligent Technology Co., Ltd. inflated revenue and profits by fabricating four types of related party transactions, namely fictitious sales, fictitious procurement, fictitious R&D outsourcing, and fund borrowing and lending, ultimately leading to the company’s delisting; Such fraud leads to financial deterioration and credit bankruptcy of the company, while also damaging the interests of investors and undermining regulatory credibility.