Investment Attractiveness of Capital Markets: Trends in De-Shadowing Business Deals

Abstract

The article considers the issues of de-shadowing of investment agreements on the capital market, in particular, on the stock market of Ukraine. Peculiarities of investing in securities as financial assets and making financial investments with the use of securities are determined. Capital markets can develop as investment-attractive systems. Common schemes of non-transparent investment in the capital market of Ukraine are revealed — the use of securities to avoid taxation or the so-called «tax optimization» of business transactions and withdrawal of capital outside Ukraine; manipulation of the price of stock assets and the use of insider information in securities trading; issue and formation of authorized capital at the expense of technical securities; raider seizure of securities of enterprises with the use of illegal change of owners. The causal factor in the reproduction of the shadowing of capital is the existing economic and organizational and legal reasons that distinguish business in one, on the other — there are such motives as greed, the desire to get rich quick, the accumulation of initial capital by any means. This is the irrational investment behaviour of households and corporations. It has been determined that securities fraud is a common crime in the stock market. Fraud in securities is manifested in criminal offenses and civil law violations of shareholders’ rights. Insufficient efficiency of regulatory institutions to combat the shadow economy is one of the reasons for the spread of the latter. The growing role of state preventive regulation in levelling the risks of shadow capital turnover is revealed and substantiated. It is substantiated that the state, represented by regulatory authorities, should have expanded institutional and instrumental capabilities to prevent risks of financial destabilization. Such opportunities are achieved both by increasing the financial literacy of investors and prudent precautionary regulatory action. Foreign experience of de-shadowing the capital market and combating economic crime is analysed. It is determined that in foreign countries much attention is paid to de-shadowing the economy and combating economic crime. Significant work in this direction is preventive in nature. Thus the system of prevention of fictitious economic activity consists of the following structures: police bodies; specialized law enforcement agencies; tax services; customs services; financial intelligence agencies. Reducing the level of shadowing of the capital market of Ukraine will increase its investment attractiveness. This will have such positive consequences as: increasing the capitalization of professional stock market participants (institutional investors) and increasing their financial stability by increasing the size of authorized capital, increasing the market price of freely traded securities («free-float»); achievement / excess of the actual solvency margin over the previous settlement. Protected and legitimate assets of professional stock market participants will provide investment income on trusted assets at a level not lower than inflation.