If you research the history of chinese reverse mergers on US exchanges, it isn't pretty. A lot of accounting fraud and other questionable actions. How does one protect against the use of financial engineering with the financial data used for Graham analysis?
Submitted by causaldiamond. Created on Wednesday 13th June 2018. Updated on Wednesday 6th March 2019.
Discretion
Dear causaldiamond,
Thank you for your forum post!
This is more an issue within the listing process itself. The threat of legal consequences is the essential deterrent to accounting fraud, and is an integral assumption of the fundamental analysis process.
If a company has the option of fearlessly fudging numbers, there is almost no way for an analyst to see through it from the numbers themselves. So until the SEC figures out a similar strategy to dissuade foreign companies from accounting fraud, investors will have to rely on their own discretion to evaluate such stocks.
There are also companies such as Yongye that have successfully defended themselves against such allegations. Therefore, the Serenity database impartially analyses all SEC approved stocks that are listed on the major U.S. stock exchanges.
Here's Buffett saying he doesn't look at companies based on their country of origin.