Capital Market Regulation Research Articles

Corporate social responsibility disclosure in Saudi companies: analysing the impact of board independence in family and non-family companies

This study examines the relationship between family-controlled companies and corporate social responsibility practice disclosure (CSRPD) and examines whether board independence influences this relationship. A self-constructed CSR disclosure index is developed to measure the CSRPD in a sample of 152 publicly listed companies in Saudi Arabia from 2016 to 2021. The findings from the pooled ordinary least squares (POLS) regression reveal that family-controlled companies exhibit lower levels of CSRPD than non-family companies. However, family-controlled companies with a higher number of independent directors on their boards show higher CSRPD, indicating a significant positive interaction effect of board independence. These results remain robust even after applying a variety of econometric techniques, including Newey-West regression, panel corrected standard error (PCSE), logistic regression, and addressing endogeneity problems, along with using different measures for CSRPD and family-controlled companies. These findings suggest that the governance structure of the boards, particularly independent directors, can support the prosocial and positive stimulus of socioemotional wealth (SEW) theory. Therefore, Saudi Arabian capital market regulators need to be aware of the importance of companies’ governance structures.

The institutionalisation of XBRL in a developing capital market: the Indonesian regulators’ and filers’ perspective

Purpose Drawing on institutional theory analytical perspectives of theorisation and translation, this study aims to explore the institutionalisation of eXtensible Business Reporting Language (XBRL) in Indonesia from a regulatory and filer perspective. Design/methodology/approach The Indonesian capital market offers a unique case of the integration of XBRL regulatory reporting between multiple regulators and a transfer from capital market regulation to state-level regulation. This study uses semi-structured interviews with key actors employed with Indonesian XBRL-regulatory bodies and listed companies (filers). Findings External pressures, monitoring issues and tensions in the implementation process were instrumental in the theorisation and translation of XBRL in Indonesia. Specifically, the findings show that choices made with respect to XBRL regulation and implementation created tensions between XBRL reporting fulfilling a monitoring purpose and serving stakeholders’ interests. The findings also indicate that the Indonesian approach to XBRL regulation and implementation had distinct characteristics compared to XBRL implementation in other jurisdictions. Practical implications This study emphasises the necessity for robust regulatory support and strict enforcement to navigate the complexities and tensions arising from a multi-regulatory approach. Additionally, it stresses the importance of firms’ readiness and expertise in XBRL as more sophisticated implementation strategies are considered. Originality/value Using the analytical lens of theorisation and translation, the study provides a deeper understanding of how a globally diffused accounting technology was institutionalised and legitimised in a developing country. Specifically, this study explains why a conversion approach to XBRL implementation was favoured and how XBRL implementation and reporting were managed and coordinated between different Indonesian regulators.

ACCOUNTING FOR BUSINESS ETHICS AND SUSTAINABILITY (A4BES): HARMONIZING ACCOUNTING FOR THE INTERESTS OF SHAREHOLDERS AND NON-SHAREHOLDER STAKEHOLDERS

The purpose of this study is to introduce a framework that assists corporate managers in transforming the promised benefits of sustainability reports into future financial performance by aligning the interests of shareholders and non-shareholder stakeholders. This descriptive study proposes a framework to investigate the stakeholder harmonization process undertaken by managers, with a pilot study focusing on Indonesian mining companies using content analysis methodology. The study hypothesizes that managers' disclosures in sustainability reports reflect their success in achieving stakeholder harmony. Modern corporate managers accomplish stakeholder harmonization by reporting on both financial performances and non-financial performances, I called them Business Ethics and Sustainability (ABES) performances. They provide outcome-based performance information on A4BES performances. The study found that Indonesian mining companies typically disclose more information than required by the capital market regulation on sustainability reporting. Mining managers, categorized as conventional managers at the second level of the stakeholder harmonization process, report over 50% of A4BES accounts but often omit outcome-based performance information. This study extends sustainability accounting literature on stakeholder theory by examining how management processes balance the interests of shareholders and non-shareholder stakeholders.

Improving Project Management in Capital Market Regulators: A Software Development Perspective

Improving Project Management in Capital Market Regulators: A Software Development Perspective

UNDERSTANDING SOLE PROPRIETORSHIP UNDER THE JOB CREATION LAW: A LEGAL HERMENEUTICS PERSPECTIVE

The issue of tender offers has gained prominence due to several high-profile cases involving the takeover of public companies, which have led to significant losses for shareholders, particularly public shareholders. The regulatory framework governing takeovers and tender offers is primarily established by Law No. 8 of 1995 concerning the Capital Market and Government Regulation No. 27 of 1998. The enactment of Law No. 21 of 2011 concerning the Financial Services Authority (OJK) in 2011 marked a significant shift in regulatory oversight, transferring authority over macroeconomic matters, including takeovers and tender offers, from Bank Indonesia to OJK. A notable example is the 2020 takeover of PT Garudafood Putra Putri Jaya Tbk. of PT Mulia Boga Raya Tbk. This study seeks to analyze the regulatory arrangements for tender offers in Indonesia and evaluate the impact of such takeovers on the public companies involved. The research employs normative legal research methodologies with a statutory approach, utilizing both primary and secondary legal materials.

Capital market manipulation and regulatory compliance – a bibliometric analysis of scholarly research in the post-2000 era

Purpose The purpose of this paper is to systematically analyze the literature around regulatory compliance and market manipulation in capital markets through the use of bibliometrics and propose future research directions. Under the domain of capital markets, this theme is a niche area of research where greater academic investigations are required. Most of the research is fragmented and limited to a few conventional aspects only. To address this gap, this study engages in a large-scale systematic literature review approach to collect and analyze the research corpus in the post-2000 era. Design/methodology/approach The big data corpus comprising research articles has been extracted from the scientific Scopus database and analyzed using the VoSviewer application. The literature around the subject has been presented using bibliometrics to give useful insights on the most popular research work and articles, top contributing journals, authors, institutions and countries leading to identification of gaps and potential research areas. Findings Based on the review, this study concludes that, even in an era of global market integration and disruptive technological advancements, many important aspects of this subject remain significantly underexplored. Over the past two decades, research has lagged behind the evolution of capital market crime and market regulations. Finally, based on the findings, the study suggests important future research directions as well as a few research questions. This includes market manipulation, market regulations and new-age technologies, all of which could be very useful to researchers in this field and generate key inputs for stock market regulators. Research limitations/implications The limitation of this research is that it is based on Scopus database so the possibility of omission of some literature cannot be completely ruled out. More advanced machine learning techniques could be applied to decode the finer aspects of the studies undertaken so far. Practical implications Increased integration among global markets, fast-paced technological disruptions and complexity of financial crimes in stock markets have put immense pressure on market regulators. As economies and equity markets evolve, good research investigations can aid in a better understanding of market manipulation and regulatory compliance. The proposed research directions will be very useful to researchers in this field as well as generate key inputs for stock market regulators to deal with market misbehavior. Originality/value This study has adopted a period-wise broad-based scientific approach to identify some of the most pertinent gaps in the subject and has proposed practical areas of study to strengthen the literature in the said field.

Premature Lawsuit in Capital Market Dispute against Losses in Shares of The Sejahtera Bersama Savings and Loans Cooperative (Study Decision No. 160/PDT/2021/PT DKI)

The capital market is a gathering place for companies and investors to carry out securities transactions such as shares, bonds and other securities. The capital market sector is very important for a country because it is the driver of a country's economy. Indonesia has a capital market sector which is regulated in Law Number 8 of 1995 concerning Capital Markets, this law explains the capital market regulations that must be obeyed by capital market players, namely investors and companies. The Indonesian government is aware of the potential for fraud, which is defined as violations or unlawful acts that are detrimental to the state and society. Regulations regarding capital markets seek to provide legal clarity and law enforcement in the capital markets sector, so that they remain important components for the development of the capital markets industry. Violations that occur in the capital market are often caused by an act carried out by an individual, in a group, directly, or by orders or influence from another party which causes losses to certain parties. These losses can be in the form of material losses and immaterial losses. As is the case with the capital market dispute in Decision no. 160/PDT/2021/PT DKI which strengthens Decision no. 745/Pdt.G/2019/PN JKT SEL. In Decision No.745/Pdt.G/2019/PN JKT SEL, the Panel of Judges stated that the lawsuit submitted by the Plaintiff could not be accepted based on several Judges' considerations, including because there was a premature lawsuit, namely a capital market dispute without first going through an examination by the Financial Services Authority. The plaintiff resubmitted the capital market dispute lawsuit by filing an appeal against Decision No. 160/PDT/2021/PT DKI and the Panel of Judges stated that they accepted the appeal by affirming the previous decision.

Islamic green finance: mapping the climate funding landscape in Indonesia

Purpose This study aims to explore the potential of Islamic climate finance in Indonesia and to map Islamic climate finance based on Islamic finance instruments, both commercial and social. Design/methodology/approach The analysis was conducted in Jakarta, Indonesia, between October 2022 and June 2023. This study adopted a qualitative interpretive approach in two phases. The first phase was desk-based research which focused on document analysis such as official documents, scientific publications, non-governmental organization publications and company reports in Indonesia. This analysis was conducted to identify significant milestones in developing green and eco-friendly finance that used Islamic financial instruments in Indonesia. The second phase consisted of interviews with essential Islamic climate finance project actors, such as green sukuk publishers, zakat and waqf collection agencies, stakeholders, capital market regulators, Shariah supervisory boards and Islamic finance experts. Findings The main finding of this study is that the development of Islamic green finance in Indonesia can occur through various channels, including greening Islamic capital markets, greening Islamic social finance, Islamic green finance and developing green banking services for the unbanked to support financial inclusion. Green sukuk, or Islamic bonds, are key financial instruments in Islamic green finance. They are used to fund projects in areas such as clean energy, mass transit, water conservation, forestry and low-carbon technology. These green financing initiatives also include socially responsible investments that are designed to improve the lives of people and communities. Research limitations/implications First, the availability of data on Islamic green finance practices in Indonesia may be limited, making it difficult to obtain a comprehensive understanding of the current landscape. Second, cultural and religious factors may play a role in the adoption and implementation of Islamic green finance, and these factors may vary across different regions in Indonesia. Practical implications The exploration and clustering of Islamic climate finance based on Islamic financial instruments in Indonesia can lead to the development of more sustainable and environmentally friendly practices in the financial industry. Originality/value This study serves as a pioneering effort to explore the potential and clustering of Islamic climate finance based on Islamic financial instruments in Indonesia.

Analysis of the Influence of the Announcement of Stock Splits on Insider Trading Indicators in the Indonesian Stock Exchange Environment for the 2013-2023 Period

The phenomenon of stock split is a corporate action to increase the number of shares outstanding in the market with the aim of making the stock price more affordable for investors. This practice is often carried out by company management to enhance stock liquidity and attract investor interest without necessarily increasing net income. However, although Stock Splits are generally considered a positive policy, some studies indicate that in some cases, Stock Splits can be exploited for insider trading activities, especially in markets with weak regulations or emerging markets. The aim of this research is to find out whether there are indicators of insider trading from stock split policies based on similar behavior in capital markets where capital market regulations are still not well regulated ( emerging markets ). By using the event study method, this research did not find any indication of insider trading because there was no cumulative abnormal return in the positive direction before the stock split was executed. By using multiple regression analysis, this research confirms that there is no indication of insider trading which is influenced by the level of state ownership, small company asset size and the tendency to split shares with a high split ratio as has been tested by previous research.

Juridical Review of Investor Protection in Insider Trading Regulations in the Indonesian Capital Market

This article will discuss the protection of investors in the event of insider trading committed by persons who do not have a fiduciary duty relationship with the issuer. The crime of insider trading is difficult to prove and the perpetrator of the crime can be released from the law, which is a person outside of fiduciary duty. Therefore, the author examines the juridical review of investor protection in the event of insider trading whose perpetrators are people outside of fiduciary duty in the capital market using a legislative and conceptual approach. The findings of this research are that in order for the perpetrators outside the fiduciary duty to be sanctioned, capital market regulation in Indonesia must embrace misappropriation theory. As well as the responsibility in order to protect investors is an individual responsibility, where the responsibility is explained in Article 104 of the capital market law.

THE EFFECT OF BRAND VALUE CO-CREATION, BRAND TRUST, AND PERCEIVED EASE OF USE ON INVESTMENT INTEREST THROUGH ELECTRONIC WORD OF MOUTH

The contribution of MSMEs is large to the Indonesian economy, but this sector still has obstacles in obtaining capital. Therefore, referring to the Indonesian Capital Market regulations, the government through OJK (Financial Services Authority), issued Regulation Number 37/POJK.04/2018 on Crowdfunding Services through information technology-based stock offerings (Equity Crowdfunding). LandX is an ALUDI registered organizer that already has OJK license. The average level of funds raised by LandX per project is up to 4 billion. The population in this study are investors who have registered at LandX totaling 88,572 as of December 2022. Samples taken using purposive sampling. The conclusions of this study are Brand trust has a significant effect on investor interest in investing, Brand value co-creation engagement attitude has no significant effect on investor interest in investing in LandX through e-WOM, Brand value co-creation engagement behavior has a significant effect on investor interest in investing in LandX through e-WOM, Perceived ease of use has a significant effect on investor interest in investing in LandX through e-WOM and E-WOM has a significant effect on investor interest in investing in LandX.

The Influence of Brand Value Co-Creation, Brand Trust, and Perceived Ease of Use on Interest In Investing Through Electronic Word of Mouth

The contribution of MSMEs to the Indonesian economy is large, but this sector still has obstacles in obtaining capital. Therefore, referring to Indonesian Capital Market regulations, the government, through the OJK (Financial Services Authority), issued Regulation Number 37/POJK.04/2018 concerning Crowdfunding Services through information technology-based share offerings (Equity Crowdfunding). LandX is an organizer registered with ALUDI which already has OJK permission. The average level of funds collected by LandX for each project is up to 4 billion. The population in this study is 88,572 investors who have registered with LandX as of December 2022. The sample was taken using purposive sampling. The conclusion of this research is that Brand trust has a significant effect on investors' investment interest, Brand value co-creation engagement attitude has no significant effect on investors' interest in investing in LandX through e-WOM, Brand value co-creation engagement behavior has a significant effect on investors' investment interest in LandX through e-WOM, Perceived ease of use has a significant effect on investors' interest in investing in LandX through e-WOM and E-WOM has a significant effect on investors' interest in investing in LandX

The market for Gree's share buyback should be analysed

With the continuous improvement of the capital market and related regulations, the number of companies implementing share buybacks has gradually increased. When faced with large fluctuations in the stock market, many companies choose share buybacks to stabilize their share prices. This paper selects the three phases of GREE's share buyback from 2020 to 2021 as the research object, and uses the event study method to analyse the changes in share price and excess return of GREE's share buyback process, and further analyses the market effects generated by the three phases of share buyback. The study found that the positive market effect of the three share buybacks implemented by Gree Electric was limited. By analysing the market effects of the share buybacks of Gree Electric, we suggest that companies implementing share buybacks should not overstate the positive effects of share buybacks.

THE IMPLEMENTATION OF THE COMPULSORY TENDER OFFER TO PT. MULIA BOGA RAYA TBK BY PT. GARUDAFOOD PUTRA PUTRI JAYA TBK

The issue of tender offers gained prominence in Indonesia primarily because of several cases where public companies were taken over by external entities, often leading to financial losses for other shareholders, especially public ones. This research focused on understanding how tender offers are regulated in Indonesia and the legal consequences of such offers. It aimed to explore the regulatory framework governing tender offers and assess the impact of takeovers on public companies that were acquired. Employing normative legal research with a statutory approach, the research examined laws and regulations such as Law Number 8 of 1995 concerning the Capital Market and Government Regulation number 27 of 1998. A significant shift occurred in 2011 when the Government enacted Law Number 21 of 2011 concerning the Financial Services Authority (OJK), which transferred macroeconomic regulatory responsibilities from Bank Indonesia to the OJK, including oversight of takeovers and tender offers. An illustrative case from 2020 involved the takeover by PT Garudafood Putra Putri Jaya, Tbk. of PT Mulia Boga Raya, Tbk.

An Empirical Analysis of Corporate Governance and Earnings Management Motives Influencing Goodwill Impairment in Chinese Manufacturing Firms

Goodwill impairment, resulting from the impairment tests conducted on goodwill generated during business mergers, serves as an effective indicator of a company's true and reliable goodwill value, as well as its operational and financial conditions. This study investigates the impact of earnings management motivations on goodwill impairment from the perspective of corporate governance, focusing on Chinese manufacturing listed companies between 2016 and 2020. Utilizing regression analysis and panel data models, the study examines the internal governance mechanisms, including the combined shareholding ratio of the top ten shareholders, and the external governance mechanisms, such as the role of the four major auditing firms. The findings reveal that both "big bath" and earnings smoothing motives can influence companies' decisions to recognize goodwill impairment, while effective internal and external governance mechanisms can help mitigate earnings management motivations. Further analysis shows that non-state-owned manufacturing listed companies are more likely to exhibit goodwill impairment behaviors driven by earnings management motives. These findings provide valuable insights for listed companies seeking to improve their corporate governance structures and for Chinese capital market regulators aiming to enhance relevant regulatory policies and refine goodwill measurement standards.

Impact Analysis of PT Fraud Cases. The Three Pillars of Sejahtera Food.Tbk and Efforts by Capital Market Regulators to Compensate Capital Market Investors' Losses

Financial statements are important information needed by investors, creditors, analysts and certain parties which are used as a basis for investing in an asset. However, fraud is often found in financial reports. PT. Tiga Pilar Sejahtera Food Tbk is an example in cases of financial report manipulation practices. The method used in this research is descriptive, in which this research uses a type of research that produces descriptive data or results in the form of written or spoken words from the object of observation. The results of this study concluded that PT. Tiga Pilar Sejahtera Food Tbk has resulted in losses to investors and the OJK as a regulator has imposed administrative sanctions, suspended assets and revoked business licenses

SEBI and the Reform on Sustainable Finance (Part 1 of 3)

Frequent environmental disasters and extreme weather events have led to the crying need for dealing with climate change and the need to finance the same sustainably. Corporate finance being driven purely by wealth maximization / profit motive, without considering the environmental and social impacts of the activities of the firms, has alleviated the need for sustainable finance. To provide for the avenues to both issuers and investors for sustainable finance, Governments and Capital Market Regulators across the globe have come up with various policy measures including frameworks pertaining to sustainable finance; SEBI regulates the capital market in India and has come up with the framework for green debt securities for the listed/propose to be listed issuers and the same have been amended from time to time to cater to the changing market landscape. While sustainable finance is gaining popularity, concerns regarding the greenwashing are also rising across the globe as there is no universal consensus on “what is green”. SEBI has addressed the issue of the greenwashing by strengthening the disclosure requirements and prescribing certain dos and don’ts to avoid the instances of the greenwashing. The article, in three parts, focuses on the SEBI’s efforts to align its green bond framework with the updated Green Bond Principles (GBP) of International Capital Market Association (ICMA) while incorporating the domestic market needs by including “transition finance” in the definition of green debt security.

The relationship between investment intensity and profitability measures from the perspective of foreign investors

Investment intensity is the level of investment in fixed assets that affects a company’s long-term growth prospects. In order to make good investment decisions, investors pay more attention to achieving a high level of investment intensity. This study examines the impact of two non-GAAP measures of profitability—earnings before interest, tax, depreciation, and amortization and earnings before interest and tax—on investment intensity in Gulf Cooperation Council (GCC) member countries. The study also examines the preference for two non-GAAP measures of profitability from the perspective of foreign investors. The study conducts panel data regressions using 205 firm observations covering the period 2010–2019 to examine the relationship between earnings before interest, tax, depreciation and amortization, earnings before interest and tax, and investment intensity. The study used various statistical estimators to overcome the heterogeneity and endogeneity problems of panel data and employed many diagnostic tests to increase robustness. The study finds that earnings before interest, tax, depreciation and amortization are positively and significantly associated with investment intensity in all GCC countries, but earnings before interest and tax are negatively associated with investment intensity in these countries. The results indicate that foreign investors prefer to use earnings before interest, tax, depreciation, and amortization to make decisions about investment intensity. The main implication of the study is that capital market regulators and foreign investors should use earnings before interest, tax, depreciation, and amortization information as a guideline to improve investment intensity decisions and achieve a better allocation of resources in capital markets.

The discipline vs complement role of product market competition and market power: Evidence from real earnings management in an emerging market

We empirically study the role of product market competition and market power, discipline vs complement role, on real earnings management (REM) in Indonesia. Using 1800 firm-year observations from 2012 to 2020, we discover that the competition has an inverse association with REM, implying that product market competition plays a role in disciplining managers from engaging REM. Despite the negative association observed, we do not have evidence of any significant relationship between market power and REM. These findings hold for a set of robustness tests. We also evidenced that the discipline role of competition in REM will be more pronounced after the Economic ASEAN Community (EAC) period and pre-COVID-19 as well as in small firms and income-increasing firms. Although we cannot include corporate governance variable in our model due to data constrain, to the best of our knowledge, the current study will be the first study examining the role of market competition and market power on REM by considering the external shock, EAC period and COVID19, in emerging market such as Indonesia. This study implies that government and capital market regulators need to design and issue new laws or regulations that can encourage the internal governance structure to maximize the potential role of market power to mitigate REM.

The role of technological innovations in institutional regulation of the financial capital market

Financial technologies (fintech) have been actively developing in recent years and are overturning conventional notions about the financial capital market. The article explores the role of technological innovations in institutional regulation of the financial capital market. Thanks to innovations such as blockchain technology, artificial intelligence, and machine learning, market participants are able to make more accurate and faster decisions, ensure transaction security and reliability, and have more transparent and efficient risk management. The article describes some examples of successful implementation of technological innovations in institutional regulation of the financial capital market, such as the use of blockchain in supply chain management, automation of risk management, and real-time processing of large volumes of data. A mathematical model of optimal institutional regulation of the financial capital market is presented. However, in addition to the advantages, the use of technological innovations also carries potential risks such as breach of confidentiality, incomplete information of market participants, and the possibility of technological glitches. Therefore, it is important to develop and effectively implement measures to regulate the use of fintech, which must comply with rules and legislation.