Investor Protection Research Articles

Accredited investor tests: How to balance, access, entrepreneurial funding, and investor protection?

AbstractRegulators seek to balance investor protection with the costs of that protection. This often leads to a distinction between “accredited” and “retail” investors. Only “accredited” investors can invest in certain “risky” or “illiquid” assets, including start‐ups and wholesale funds. But what should be the “bar” to be classified as “accredited”? Should people be able to qualify via income, wealth, or education? Should they be able to self‐certify? Thus, this article considers the situation in the US, UK, and Australia and argues in favour of letting people qualify via wealth, income, and education and being able to self‐certify.

Intelligent water quality prediction system with a hybrid CNN–LSTM model

ABSTRACT Water pollution remains a longstanding challenge globally, prompting substantial investment in water quality protection. The integration of advanced machine learning models offers promising avenues for accurate water quality prediction, enabling proactive measures to safeguard water sources. Presently, water quality assessment relies predominantly on physical and chemical metrics. This study developed MultiLayer Perceptron (MLP), eXtreme Gradient Boosting (XGBoost), long short-term memory (LSTM), and a hybrid CNN–LSTM model to forecast pH and dissolved oxygen (DO) levels. Results demonstrated the hybrid model's superior performance, with mean squared errors (MSEs) of 0.0015 and 0.0361 for pH and DO prediction, respectively. For Water Quality Classification (WQC), Random Forest (RF), k-Nearest Neighbors (kNNs), Support Vector Machine (SVM), and Light gradient Boosting Machine (Light GBM) were employed, with SVM achieving the highest accuracy at 88.75%. The research underscores the effectiveness of the CNN–LSTM model in predicting pH and DO levels. Leveraging these predictions as inputs to the SVM model offers valuable insights, particularly in regions where conventional monitoring methods face limitations. This streamlined approach, requiring only two parameters, signifies a significant advancement in accurate water quality prediction.

The Structure of the Legal Institute of the Protection of the Retail Investor

The article is an attempt of a structural approach to the protection of the retail investor. “Structural” in this contest includes the necessity to take into consideration the role of the retail investment market in the financial system of the state, the risky nature of this market, including the potential risky consequences which it can create for the state, therefore the public interest of the state is of “indirect” nature and the “investor protection” is likely to be understood as the fare redistribution of the risks on the retail investment market. The article suggests the four main areas where the relevant measures are to be undertaken.

The Legal Regime of the Investment Protection and Promotion Agreement

Introduction: the paper deals with a new contractual structure – the investment protection and promotion agreement, which is one of the investment instruments aimed at stimulating interaction between a public legal entity and a private legal entity. According to the author, Investment Protection and Promotion Agreements are part of a group of investment agreements mediating the mechanisms of a public-private partnership. The purpose of the paper is to study the problems related to the concept, legal nature, and content of the investment protection and promotion agreement. The author also examines the place of the agreement under study in the system of investment contracts and the relationship with related concepts and categories, including the issue of applying the provisions of civil legislation to it. Methods: both the general scientific and specific scientific methods of scientific cognition are used, among which one can distinguish systematic, dialectical, structural and functional, etc. The methods of formal legal, comparative law, and legal forecasting allow taking into account the specifics of the legal nature of the concepts under study, comparing homogeneous legal phenomena, and identifying prospects for the development of legal relations in dynamics. Results: an analysis of the new contractual structure on attracting investments – the investment protection and promotion agreement led to the conclusion of the legislative confusion and difficulty in determining its content and legal nature. Conclusions: the author concludes that it is difficult to determine the legal nature of the investment protection and promotion agreement (IPPA) today due to the imperfection of the Federal Law “On the Investment Protection and Promotion in the Russian Federation,” which does not allow to unequivocally answer the question of whether an investment project should be implemented within the framework of the IPPA itself, or whether it is also necessary to conclude an additional agreement. It is claimed that the IPPA is an unnamed agreement that has no analogues in the Russian legislation. It is concluded that the structure of the IPPA includes the implementation of an investment project. According to the author, until clarification is made to the Federal Law “On the Investment Protection and Promotion in the Russian Federation,” the IPPA will not be implemented in practice.

Facilitator or figurehead? The impact of academician shareholder on corporate innovation: Evidence from China

Investment by academicians with resource advantages can serve as a vital channel for promoting innovation. In this study, we investigate whether and how academician shareholders who are esteemed fellows or candidates of the Chinese Academy of Sciences and the Chinese Academy of Engineering impact corporate innovation. Using a sample from China, we document a positive association between academician shareholders and corporate innovation. Our channel analysis reveals four potential channels through which academician shareholders promote corporate innovation: innovative human capital, investor protection, top management team attention to innovation and reduction in innovation uncertainty. Moreover, in line with the resource-based view and incomplete contract theory, our findings indicate that the positive association is more pronounced in firms with directors appointed by academician shareholders, without state ownership, and with multiple large shareholders. Finally, our findings indicate that academician shareholders can enhance open innovation, attract government subsidies, shorten the time it takes for corporate patent applications to be granted, and improve firm performance.

Monitoring and Evaluation of Coastal Ecological Carrying Capacity in the Context of Sustainable Development: A Case Study of Shandong Province

The research on coastal ecological carrying capacity holds great significance for the sustainable development of coastal areas and is a focal point of the United Nations Sustainable Development Goals (SDGs). This study coupled multi-source data and ecological analysis models to construct a multi-level evaluation system and analysis method for the coastal ecological carrying capacity of Shandong Province so as to realize the dynamic monitoring and evaluation of the coastal ecological carrying capacity of Shandong Province from 2010 to 2020. The results indicated: (1) The ecological carrying capacity of the coastal zone in Shandong Province showed a “U”-shaped development trend, with 2016 being a turning point. (2) The economic development–social support system gradually became the main force driving the overall improvement of coastal ecological carrying capacity. (3) The system coupling coordination degree of ecological carrying capacity in the coastal areas of Shandong Province showed a trend of first decreasing and then increasing, with a high level of internal coupling coordination of carrying capacity. (4) Per capita GDP, environmental protection investment, per capita water resources, and other indicators were the main factors driving the changes in the ecological carrying capacity of the coastal zone. This study aims to provide methodological reference and data support for coastal ecosystem monitoring, assessment, and climate change response.

Asset pricing in African frontier equity markets

This paper undertakes a horse races style comparison of the efficacy of a range of multifactor asset pricing models in explaining the cross section of stock returns in African securities markets. Valuation factors used include size, book-to-market value, momentum, operating profit, asset growth or investment, liquidity and investor protection. Using monthly returns of 375 blue chip firms from 8 African equity markets over 23 years, we undertake a horse-race style comparison of various classes of augmented CAPM models. We show that both the Fama & French (2015) five factor and Fama & French (2018) six factor framework yield the highest explanatory power. Analysis of costs of equity and optimized portfolio opportunity set simulations reveal substantial differences arising and borne by practitioners from the contrasting application of different asset pricing models underscoring the timely importance of our study.

Polytope Fraud Theory

Polytope Fraud Theory (PFT) extends the existing triangle and diamond theories of accounting fraud with ten abnormal financial practice alarms that a fraudulent firm might trigger. These warning signals are identified through evaluation of the shorting behavior of sophisticated activist short sellers, which are used to train several supervised machine learning methods in detecting financial statement fraud using published accounting data. Our contributions include a systematic manual collection and labeling of companies that are shorted by professional activist short sellers. We also combine well-known asset pricing factors with accounting red flags in financial features selections. Using 80 % of the data for training and the remaining 20 % for out-of-sample test and performance assessment, we find that the best method is XGBoost, with a Recall of 72 % and F1-score of 82 %. Other methods have relatively lower performance, demonstrating the robustness of our results. This shows that the sophisticated activist short sellers, from whom the algorithms are learning, have excellent accounting insights, tremendous forensic analytical knowledge, and sharp business acumen. Our feature importance analysis indicates that potential short-selling targets share many similar financial characteristics, such as bankruptcy or financial distress risk, clustering in some industries, inconsistency of profitability, high accrual, and unreasonable business operations. Our results imply the possible automation of advanced financial statement analysis, which can both improve auditing processes and effectively enhance investment performance. Finally, we propose the Unified Investor Protection Framework, summarizing and categorizing investor-protection related theories from the macro-level to the micro-level.

The Impact of Environmental Regulation on Enterprise Green Innovation

This paper evaluates the real effects of the environmental regulation at the firm level. Using the implementation of Chinese Air Pollution Prevention and Control in 2013 as a quasi-natural experiment,difference-in-differences estimation shows that: (1) environmental regulation significantly improve the application of green innovation by firms, and this relationship is robust to different specifications and alternative measures; (2) three possible channels are the improved levels of the environmental protection subsidy, total factor productivity (TFP) and environmental protection investment of enterprises; (3) our findings are particularly pronounced in subsamples with the application of utility green innovation and state-owned enterprises (SOEs). Overall, this paper reveals the micro-mechanisms behind the real effects of environmental regulation on firm green innovation, thus providing timely implications for regulators concerned with environmental protection.

How effective is legal protection in Indonesia in handling investment fraud cases compared to other countries?

Legal protection for investors is crucial in preventing the negative impact of rampant investment fraud, especially in the digital era that facilitates access to information. The ever-growing phenomenon of investment fraud shows the importance of evaluating the effectiveness of existing legal frameworks. This study aims to analyze the effectiveness of legal protection in Indonesia in dealing with investment fraud cases, with a normative juridical approach that examines relevant regulations in Indonesia and compares them with other countries such as the United States and India. This method is used to understand the weaknesses and challenges in the implementation of existing laws. The results of the study show that although Indonesia has a comprehensive legal framework, such as Law Number 8 of 1995 on the Capital Market and the Electronic Information and Transaction Law (UU ITE), challenges in law enforcement and public education are still significant obstacles. Unlike the US and India, which implement strict sanctions and have strict supervision, legal protection in Indonesia still needs reforms to increase the deterrent effect for actors and strengthen public trust in the investment system.

Legal Liability, Institutional Environment and Audit Pricing: Insights from China’s Securities Law Revision

This study investigates the impact of China's revised Securities Law (2019) on the audit pricing strategies of A-share listed companies. Using a Difference-in-Differences (DID) approach and a sample of 26,057 firm-year observations from 2016 to 2022, we find that the new law led to a significant increase in audit fees, especially for non-state-owned enterprises and firms in regions with stronger legal institutions. We attribute these effects to the heightened legal liability and regulatory scrutiny faced by auditors under the new regime, which incentivizes them to enhance audit quality and charge higher risk premiums. Our results are robust to a series of sensitivity tests and alternative specifications. We conclude that the revised Securities Law has achieved its intended objectives of improving market transparency and investor protection but at the cost of higher compliance burdens for listed companies. Our findings have important implications for policymakers, regulators, and market participants in China and other emerging economies undergoing similar legal and institutional reforms.

A Rise in the No. of Initial Public Offer’s in the Indian Public Markets

The research paper is an analysis of the Indian stock market and analyses an increase in Initial Public Offerings (IPOs) made between 2012 to 2024 The growth is also attributed to factors such as positive economic data, growing investor interest, and regulatory softening. No doubt that there has been some change, but the trend has overall remained stronger riding high on bullish market sentiment as well as confidence from investors. The study stresses that this growth is only possible if the continued regulatory oversight and investor protection measures in place remain following the growth.

The Identification and Regulation of Expropriation in International Investment Law

This essay focuses on the concept of expropriation within the framework of international investment law. Expropriation has evolved from direct state appropriation of foreign investors’ property to indirect expropriation, a more covert measure without the transfer of ownership. This essay distinguishes between direct and indirect expropriation, explores the meaning of expropriation through key cases, and evaluates the challenges tribunals face in legal practices. Finally, this essay examines the role of fair and equitable treatment (FET) standards and compensation mechanisms. With an effective regulation of expropriation, the author believes that a balance between state sovereignty and investor protection can be achieved.

The Efficiency of Procurement Process, Organization Performance, and Product Training in Public Organization

The manufacturing sector is considered a key driver of economic progress across different sectors. Industrial products typically enjoy higher "terms of trade," making them more profitable and generating greater added value compared to products from other sectors. This is due to the sector’s diverse range of products and its ability to offer substantial marginal benefits to users. As a result, business players including manufacturers, distributors, traders, and investors are more inclined to participate in this sector because of its attractive profit margins. The government has implemented various initiatives to promote industrial development, which has in turn increased the demand for funding to support this growth, particularly in the industrial sector. In addition to relying on internal sources of finance, the government has been working to secure more external funding, such as foreign investment and foreign loans, to complement development efforts. Given the limited availability of funds, the government needs to adopt policies that open up more opportunities for both domestic and foreign private sector participation in national development. To support this, the government has enacted legislation such as Law No. 1 of 1967 on Foreign Investment (PMA) and Law No. 6 of 1968 on Domestic Investment (PMDN). These laws were later refined through Law No. 11 and Law No. 12 of 1970 and various deregulation policies, including the May 6, 1986 Package, Pakto 1993, and Government Regulation No. 20 of 1994. The government later reorganized its investment policies by passing Law No. 25 of 2007 concerning Capital Investment, which aimed to provide legal certainty, protection, and simplified licensing processes for both domestic and foreign investors. This law is designed to create a more favorable investment environment in Indonesia.

Evaluating robo-advisors through behavioral finance: a critical review of technology potential, rationality, and investor expectations

The mini review assesses the value propositions of robo-advisors through the lens of behavioral finance. Despite their promise of data-driven, rational investment strategies, robo-advisors may not fully replicate the personalized service of human financial advisors or eliminate human biases in decision-making. A content analysis of 80 peer-reviewed articles and publications was conducted, focusing on the intersection of financial technology and behavioral finance. Literature was retrieved using The Chicago School University Library's OneSearch and the EBSCO host database, with key terms including “robo-advisor,” “investment behavior,” “risk tolerance,” “financial literacy,” and “affective trust.” The review identifies four key limitations of robo-advisors: (1) their inability to replicate the service-relationship of human advisors; (2) the presence of human bias in supposedly rational algorithms; (3) the inability to minimize market risk; and (4) their limited impact on improving users' financial literacy. Instead, robo-advisors temporarily compensate for a lack of financial knowledge through passive investment strategies. The findings suggest that integrating behavioral finance principles could enhance the predictive power of robo-advisors, though this would introduce additional complexities. The review calls for further research and regulatory measures to ensure that these technologies prioritize investor protection and financial literacy as they continue to evolve.

THE EVOLVING LANDSCAPE OF INVESTOR PROTECTION: BALANCING STATE SOVEREIGNTY AND INVESTOR RIGHTS IN THE 21ST CENTURY

The evolving landscape of investor protection in the 21st century requires a delicate balance between safeguarding investor rights and preserving state sovereignty. As global investments expand, investors seek legal assurances to protect their assets, while states must retain the ability to regulate in the public interest, addressing economic, social, and environmental challenges. This tension has sparked debates about the role of investor-state dispute settlement (ISDS) mechanisms and the need for reform. By modernizing investment treaties and dispute resolution processes, the international community can create a more equitable system that fosters both investment and sustainable development, ensuring mutual benefits for investors and states alike.

The Effects of Governance-Related Regulatory Reform: Ownership Structure and Earnings Management in Vietnamese Listed Firms

The purpose of this study is to examine how the influence of the internal corporate governance mechanism, namely ownership structure, on firms’ earnings management (EM) practices and insider choices between accrual-based and real EM changed after regulatory reform in Vietnam. The author considers the role of three ownership types, managerial, state and foreign, and assess how the relation between ownership structure and EM was affected by the Code of Corporate Governance reform. The study relies on a comprehensive sample of 4,408 firm-year observations of 596 firms listed on either the HOSE or HNX between 2008 and 2016. The study finds a significant effect of the reform on the relation between ownership structure and EM. Thus, the reform mitigated agency problems of managers and foreign investors in Vietnamese listed firms. The study contributes to the literature as it provides a more complete picture of the effects of managerial, state and foreign ownership on EM where the protection of minority investors is generally weak and legal enforcement is low in a developing economy.

Protection Against Arbitrary or Discriminatory Measures in International Investment Law

Protection against arbitrary or discriminatory measures is a clause for the protection of foreign investments that is included in international investment agreements. The clause imposes an obligation on the state where the investment is made not to harm foreign investments by arbitrary or discriminatory measures. Although it is sometimes overshadowed by other investment protection standards in international investment arbitration, it is actually an independent standard that is frequently regulated in investment agreements. In this article, firstly, the drafting of the protection against arbitrary or discriminatory measures in international investment agreements, its elements and its historical development are discussed. After that, the meaning and scope of the concepts of "arbitrariness" and "discrimination", which are two elements, were examined.

Do US cross-listings, IFRS adoption and domestic investor protection impact earnings management?

PurposeThis paper investigates the impact of International Financial Reporting Standards (IFRS) adoption and domestic investor protection on the relationship between United States (US) cross-listing and earnings management.Design/methodology/approachThe paper applies ordinary least squares (OLS) regression analyses to a matched sample of cross-listed and non-cross-listed firms from 2000 to 2018, covering 38 countries.FindingsWe find that US cross-listed firms have lower real earnings management. The results also show that real earnings management is lower for US cross-listed firms that adopt IFRS and from high domestic investor protection countries. Our results further show that real earnings management is higher when cross-listed firms use Level 1 American Depository Receipts (ADRs) to cross-list but adopting IFRS and high domestic investor protection help reduce real earnings management. Using the SEC’s Rule 12h-6 as a quasi-natural experiment, we document that post-12h-6 Rule, firms in high domestic investor protection countries experience a reduction in both accruals and real earnings management. However, the result is the opposite in countries with low investor protection.Originality/valueOur findings have implications for regulators and policymakers on the impact of ADR levels and Rule 12h-6 on earnings management.

Breaking down the impenetrable wall: What are the barriers to good corporate governance practices above all?

Good corporate governance practices are essential in every organisation to ensure accountability and due diligence enhancing corporate value. However, some countries face barriers to good corporate governance practices such as poor regulatory frameworks, perceived constraints, and threats from external factors, etc. Therefore, the organisations will face consequences such as eroding shareholder confidence, declining market value and the organisation integrity. Hence, the study’s main objective is to systematically review the barriers to good corporate governance practice in the global context. This study uses a systematic literature review whereby the authors analyse 24 selected articles. Therefore, the main findings indicated ten barriers to good corporate governance practices. The ten barriers are weak regulatory framework, perceived constraints, poor quality of information, external business factors, lack of awareness, confusion of authority, lack of monitoring, board diversity, transparency and investor protection. These findings provide significant contributions in theoretical development for potential scholars and practical implications for organisations, stakeholders, investors, and corporate leaders who aim to strengthen the governance framework, improve organisational resilience and promote sustainable value creation to understand these barriers comprehensively.