Securities Market Regulation Research Articles

Green Inquiry Letter and Corporate Green Innovation

As a form of non-punitive regulatory policy, the inquiry letter has garnered significant attention from academic circles. However, its impact on corporate green innovation has not been fully explored. This study aims to address this gap by examining the influence of green inquiry letters (hereinafter referred to as "green inquiry letters") on corporate green innovation activities based on data from listed companies spanning 2015 to 2022. The findings indicate that green inquiry letters issued by the exchange can effectively promote the green innovation of enterprises, and this conclusion holds true even after conducting a series of robustness tests. Furthermore, in regions with higher levels of pollution and increased public concern, the impact of green inquiry letters is particularly pronounced. Mechanism analysis reveals that green inquiry letters lead to a significant increase in both pollution charges and negative news coverage for enterprises, thereby facilitating their transition towards environmentally-friendly practices. Overall, it is evident that green inquiry letters stimulate green innovation by heightening regulatory pressure and non-compliance costs faced by companies. This underscores the crucial role played by these letters in enterprise supervision and provides valuable insights for enhancing securities market regulation mechanisms.

Financial mechanism in the system of countering unfair practices in the securities market

The subject of this study is the system of countering insider transactions and manipulation in the securities market in terms of its mechanisms. The purpose of this work is to determine the place of the financial mechanism of counteraction and its role in the system of combating unfair practices. The securities market is the most important element ensuring the development of the economy. Today, one of the main problems of its regulation in Russia is the search for effective mechanisms to combat illegal practices. As a result of such activities, the financial security of participants is put at risk, and confidence in the market is reduced. The issue of finding and implementing new mechanisms to improve the effectiveness of control over the activities of participants is becoming urgent. In order to increase the effectiveness of the market regulation system in terms of control over insider trading and manipulation, the author proposes the introduction of a financial mechanism to counter insider trading and manipulation in the securities market. The methods of modeling and analogy, classification, comparison, system analysis, synthesis and generalization were used in the work. A comparative analysis of counteraction systems in countries with the world's leading stock exchanges has been carried out. The results show that each of the considered systems has a financial mechanism of counteraction, expressed not only by strict fines related to the amount of damage caused, but also by additional amounts of compensation, which is absent in domestic practice. The author analyzes the existing system of regulation of the Russian securities market, identifies its components, and highlights the main disadvantages. In addition, the analysis of the system showed that such a component as a financial counteraction mechanism has not been fully formed to date. The existing measures do not ensure the effectiveness of the fight against illegal practices. The financial mechanism of counteraction in Russian practice is fragmented, and the existing fines have no economic justification and are directly related to the damage caused to the market. In addition, no other measures are provided to compensate the losses received by the participants. Thus, in this paper, the concept of a financial mechanism for countering insider and manipulative activities is proposed, and its place in the Russian securities market regulation system is determined.

Liquidity Impact of Novel Market Surveillance Measures—An Evidence from India

Stock price manipulation can be defined as trading behaviour that distorts stock prices with the intent of personal gains. Securities market regulators around the world undertake market surveillance to prevent market manipulation protect investors and ensure market integrity. The Securities Exchange Board of India along with stock exchanges has implemented a novel additional surveillance measure (ASM) which tracks stocks on a daily basis for abnormal price and volume activity accompanied by the participation of market-dominating investors in trading activity. Stocks that breach predefined limits of the above parameters are categorized as ASM category and subject to overall additional margins and selective additional margins for the dominating investor. There are mainly two types of ASM, Long term additional surveillance measures (LTASM) and short-term additional surveillance measures (STASM). STASM consider a shorter duration time (5/15 days) for share price observation LTASM considers a longer duration (1 month/1 year) for screening of the stock for surveillance measures as per ASM criteria. This study is based on STASM. The mechanism, on the one hand, is expected to deter manipulators and on the other, warn investors about suspicious activity in the stock, which is not supported by fundamentals. This article analyses the impact of surveillance actions on a price return and liquidity. The article also looks at the degree of speculative activity surrounding the event. This study used regression analysis for impact assessment. The study results show that the prices of the stock stabilize after inclusion and there is an overall fall in liquidity post-inclusion. However, the liquidity impact is different for stocks with positive abnormal returns as compared to those with negative abnormal returns. The result of the study gives insight into the effectiveness of STASM which will be useful for regulators and investors to prevent market manipulations.

The Crime of "Pig-butchering Scams" in the Securities Market and Legal Regulation

This article aims to discuss the crime of "pig-butchering scams" in the securities market and its legal regulation. First, the article introduces the definition of the crime of "pig-butchering scams" and its harmfulness. Secondly, the article analyses the current legal regulations on the crime of "pig-butchering scams" in China. It points out problems, such as bottlenecks in applying laws and difficulty collecting evidence. Finally, the article suggests improving laws and regulations, strengthening supervision and reducing investor information asymmetry to solve the crime of "pig-butchering scams" and legal regulation. This article is focused and clear and sorts out the problems and solutions so that readers can quickly understand the theme and purpose of this article.

Reputational risk and stock price: a corporate management analysis

PurposeThe study aimed to determine how reputational risk affects the stocks prices of companies listed on the Lima Stock Exchange.Design/methodology/approachThe study follows a documentary research with a quantitative approach. Companies from different sectors listed on the Lima Stock Exchange were taken as a sample.FindingsThe incidence between the reputational risk and the stock price of the companies listed on the stock market, as well as the impact on profitability indicators and income level were demonstrated. Additionally, it was determined that the cost of capital has a greater impact if the entity is financed from the issuance of bonds rather than by subsidiaries.Originality/valueCompanies that presented well-known events in Peru and those that caused damage to their corporate reputations were studied. Likewise, information from sources such as Monitor Empresarial de Reputación Corporativa, Peruvian Securities Market Regulator’s office and Lima Stock Exchange was documented in order to analyze the variations in financial indicators during the indicated events. Financial models such as CAPM and GORDON-SHAPIRO were also used.

Non-Value-Added Tax to improve market fairness and quality

The promotion of both market fairness and efficiency has long been a goal of securities market regulators worldwide. Accelerated digital disruption and abusive trading behaviors, such as the GameStop mania, prompt regulatory changes. It is unclear how this “democratization” of trading power affects market fairness as economies cope with pandemic-driven shifts in basic systems. Excessive speculation and market manipulation undermine the quality of financial markets in the sense that they cause volatility and increase the pain of bubble and crash events. Thereby, they weaken public confidence in financial markets to fulfill their roles in proper capital allocation to irrigate the real economy and generate value for society. While previous studies have mostly focused on market efficiency, our study proposes a tool to improve market fairness, even under periods of stress. To encourage value generation and improve market quality, we advance a graduated Non-Value-Added Tax that we implement in an agent-based model that can realistically capture the properties of real-world financial markets. A profitable transaction is taxed at a higher rate if it does not enhance the efficiency measured by deviation from fundamentals. When an agent locks in profit not supported by fundamentals but driven by trend-following strategies, the generated profit is taxed at various rates under the Non-Value-Added Tax regime. Unlike existing financial transaction taxes, the non-value-added tax is levied on profit rather than on price or volume. We show that the proposed tax encourages profitable trades that add value to the market and discourages valueless profit-making. It significantly curtails volatility and prevents the occurrence of extreme market events, such as bubbles and crashes.

ПОКАЗАТЕЛИ, ВЛИЯЮЩИЕ НА ФОНДОВЫЙ РЫНОК В РОССИИ, И РЕГУЛИРОВАНИЕ ЕГО РАЗВИТИЯ

The need to establish factors and indicators immediately affecting the Russian stock market is caused by the fact that the stock market has a significant impact on the economic development of the state. The paper focuses on the factors and indicators that can affect the domestic stock market development. The author used correlation and regression analysis to assess the impact on the stock market development in Russia of such indicators as the number of credit institutions, the number of citizens who opened brokerage accounts at the Moscow Stock Exchange, the number of financial pyramids. To exclude speculative transactions, usually involving shares and negatively affecting the development of the securities market, the volume of debt securities issuance was chosen as an indicator characterizing the stock market development. It is proved that the most significant indicator affecting the activity of issuers in Russia when issuing debt securities is the investment activity of citizens at the Moscow Stock Exchange (the number of brokerage accounts opened annually). The author gives recommendations on the securities market development and regulation in Russia, including the need to expand tax benefits (in addition to the benefits extended to individual investment accounts) for transactions of individuals with securities at the organized stock exchanges; it is recommended to continue the systematic work of authorities and other institutions to improve the financial literacy of the population. The concept of a financial supermarket has been developed based on the use of financial engineering and technological and informational infrastructure of the Gosuslugi.ru website. According to it, investors determine the parameters for issuing securities, while issuers retain the right to choose from the proposed options.

Assessing the impact of globalization on stock market in Ukraine

The article is devoted to studying the impact of globalization processes on the development of national economies. In particular, the indicators of assessing the impact of globalization on financial and non-financial indicators of countries' development are considered. Attention is paid to the place of Ukraine in the KOF Globalization Index 2020 ranking, namely in terms of economic, social, and political globalization. The author has formed three groups of indicators that allow assessing the influence of globalization on the securities market of a country. The first group includes indicators that help determine the degree of integration of the national securities market into the global one. The second group includes indicators that determine the extent to which domestic securities legislation and principles of securities market regulation are adapted to international standards. The third group of indicators is aimed at quantifying the impact of trends in the global securities market on the national. The article examines the impact of one of the indicators of the third group on the securities market of Ukraine. In particular, the correlation analysis of the relationship between the Ukrainian PFTS index and the indices of American, British, European, and Polish stock markets was conducted. The author made conclusions about the availability of the significant correlation between global stock indices, as well as the weak impact of global securities market trends on the dynamics of the Ukrainian market. It was also revealed during the analysis, that the level of correlation between indices depends on whether the financial market is in crisis. Particularly, the analysis covered three periods: the 2008-2010 financial crisis, the 2020-2021 Covid-19 crisis, and the 2010-2020 period between the crises.

Investor protection, corporate governance and private information-based trading

PurposeThis study aims to examine the effects of investor protection (PROT), internal and external corporate governance (CG) on private information-based trading (PIBT).Design/methodology/approachThis study uses a sample of 3,438 firms from 42 countries for the period 2002–2015 to examine the effects of the broad and specific measures of PROT, internal CG and external CG (product market competition and block ownership [BOWN]) on a more accurate measure of PIBT using regression analysis.FindingsThe results show that PROT and BOWN are effective in reducing PIBT. However, the specific measure of PROT (strength of PROT) is not significant in emerging markets and civil law countries. The internal CG is also significant but has a positive effect on PIBT.Research limitations/implicationsThe results suggest that PROT law matters in the efforts to prevent PIBT. Policymakers and securities market regulators, particularly in emerging markets and civil law countries, should focus more on refining existing securities laws and enacting detailed securities rules that explicitly prevent specific market manipulation and PIBT.Originality/valueThis study provides evidence for the importance of specific and detailed securities rules in different market and legal environments. Furthermore, this study uses the segregated private information-based speculative trading component to accurately measure the PIBT.

СПЕЦИФІКА ФУНКЦІОНУВАННЯ РИНКУ ЦІННИХ ПАПЕРІВ ТА ФОНДОВИХ БІРЖ УКРАЇНИ

The study used: system approach to substantiate the principles and problems of the securities market and stock exchanges of Ukraine, statistical analysis of the actual performance of relevant markets; graphic – to visualize and evaluate the results of the study. The following tasks were performed to reveal the selected topic: the theoretical bases of research of institutional intermediaries in the system of international trade relations are revealed; the peculiarities of the securities market and stock exchanges of Ukraine are analyzed; the ways of improvement of exchange activity in Ukraine are covered. It is established that the most important tasks of the organized securities market are: 1. Ensuring flexible interpectoral redistribution of investment resources. In the process of investing personal savings, savings in the corporate and public finance sector in securities on the organized market is the redistribution of financial resources in the industry with a higher rate of return. Personal funds and temporarily free funds of private companies, investment funds are invested in securities that bring the most income. As a result, there is a redistribution of funds between industries and sectors of the economy; 2. Attracting investments in Ukrainian enterprises. Due to the operation of the primary organized securities market, financial resources invested in securities are made available to enterprises and spent on investment purposes; 3. Creating conditions to stimulate savings and their further investment. An organized securities market creates more comfortable conditions for traders, providing a higher degree of financial protection. This is achieved through the regulation of procedures for the purchase and sale of securities, the implementation of measures to regulate and self-regulate the market; 4. Transformation of property relations. In the process of circulation of securities on the organized market there is a redistribution of property rights to financial assets in the economy, including the privatization (privatization) of enterprises, the formation of a new class of owners and entrepreneurs; 5. Improving the market mechanism and management system. In the process of organized securities trading, modern technologies, advances in computer technology and programming are used, the process of forming a fair market value for securities is more high-tech and efficient than in the unorganized market. The development of digital technologies contributes to the improvement of the operations management system, increase the efficiency of decision-making, provides the process of managing timely and reliable information; 6. Ensuring real control over stock capital on the basis of state regulation. State regulation should be aimed at creating a favorable investment climate, comfortable conditions for doing business. At the same time, acceptable control over transactions in the stock market provides sufficient information to make decisions on areas for further development of legislation in the field of securities market regulation.

Contrasting Worldviews at Bank and Securities Market Regulators

AbstractBank and securities regulators operate with different attitudes about the appropriate regulation of financial institutions and markets. Bank regulators’ prudential oversight protects depositors from worrying about the repayment of their bank claims. In contrast, securities market regulators tend to presume that security markets (almost) always clear quickly at prices close to the asset's fundamental value. These regulators seek to assure full disclosure of information, which facilitates active securities trading. In the United States, the Securities and Exchange Commission's (SEC) investor protection duties are tailored to the financial sophistication of individual investors.

Finding Misstatement Accounts in Financial Statements through Ontology Reasoning

Finding misstatement accounts in financial statements, is a key problem of fraud detection. Potential applications include external audit, internal controls, investment decision and securities market regulation. However, most existing intelligent methods just detect financial statements fraud at the company level, while little research can detect financial statements fraud at the account level. For this, to achieve intelligent fraud detection at the accounts level, an ontology-based fraud detection framework was proposed. To be specific, the proposed framework mainly combines the articulation between different accounts and periods, and 30 financial indicators (ratios) as the knowledge basis of ontology. Notably, with OWL (Ontology Web Language), SWRL (Semantic Web Rule Language) and Protege ontology editor, the case study not only completed the fraud detection in a fast and timely manner, but also provided logical explanation and risk warning at the accounts level. This fully shows the great advantages and applicability of the proposed framework in the detection of misstatements accounts. Moreover, the proposed framework is of great significance for timely detection, prevention and response of financial statements fraud. More importantly, the proposed framework opens-up a new direction of using ontology reasoning techniques to find misstatement accounts in financial statements, which provides an interpretable and fine-grained way for fraud detection.

Green Accounting Standards and Taxability of Carbon Credit Certificate

In Green Accounting, unlike developed countries, Indian companies are lagging behind in booking of costs on envirnoment under appropriate heads in in absence of Accounting Standards. Moreover, there is insufficient Disclosures on Envirnoment in Annual Accounts. Except few elite companies, Indian corporates are shying away from disclosures on reduction of carbon emission. On the contrary, in USA and in EU including U.K. have sufficient Accounting Standards under GAAP and IFRS coupled with Disclosure Norms of SEC and EU Securities Market Regulation. Carbon Credits is a financial offer in form of a certificate to an emission prone company for reduction of the emission of Green House Gases and also carbon dioxide. This certificate is known as Certified Emission Reduction (CER) certificate. This certificate is tradable in MCX in India and European Climate Exchange, Chicago Climate Exchange, NASDAQ OMX etc. The aspects of Taxation of Carbon Credit under GST and Income Tax have been debated here.

Securities Market Regulation Theories and Perspectives of their Improvement

This paper attempts to outline the theoretical basis of securities market regulation, to describe some actual problems, and to propose some improvements. It provides conceptual and ideological remedies for application at the local level through analyzing existing theories on securities market regulation at a global scale, and through considering chronic issues that plague the modern securities market. The structure of the paper is as follows: first, there is a discussion on the necessity and importance of securities market regulation theory with the aim of determining the actual need for legal regulation. Then an overview follows on the basic theories that directly relate to securities market regulation. And, lastly, there is a review of the main problems of modern securities markets accompanied by proposals aimed at addressing those problems.

Regulatory Cooperation in Securities Market Regulation: Perspectives from Australia

The global financial crisis highlighted the interconnectedness of international financial markets and the risk of contagion it posed. The crisis also emphasized the importance of supranational regulation and regulatory cooperation to address that risk. Yet, although capital flows are global, securities regulation is not. As a 2019 report by IOSCO notes, the regulatory challenges revealed during the global financial crisis have by no means dissipated over the last decade. Lack of international standards, or differences in the way jurisdictions implement such standards, can often result in regulatory-driven market fragmentation. This article considers a range of cooperative techniques designed to achieve international regulatory harmonization and effective cross-border financial market supervision. It discusses three major techniques: (i) transgovernmental networks of financial regulators; (ii) complex multilateral arrangements; and (iii) mutual recognition agreements, and considers the benefits and downsides of each of these regulatory mechanisms. The article focuses particularly on developments in Australia. It examines, for example, a high profile cross-border supervisory experiment, the US-Australian Mutual Recognition Agreement, which the SEC and Australia’s business conduct regulator, ASIC, signed in 2008. This was the first agreement of its kind for the SEC. The article also considers some key regulatory developments in Australia and Asia since the time of the US-Australian Mutual Recognition Agreement.

Regulatory Cooperation in Securities Market Regulation: Perspectives from Australia

The global financial crisis highlighted the interconnectedness of international financial markets and the risk of contagion it posed. The crisis also emphasized the importance of supranational regulation and regulatory cooperation to address that risk. Yet, although capital flows are global, securities regulation is not. As a 2019 report by IOSCO notes, the regulatory challenges revealed during the global financial crisis have by no means dissipated over the last decade. Lack of international standards, or differences in the way jurisdictions implement such standards, can often result in regulatory-driven market fragmentation. This article considers a range of cooperative techniques designed to achieve international regulatory harmonization and effective financial market supervision. It includes discussion of a high profile cross-border supervisory experiment, the 2008 US-Australian Mutual Recognition Agreement, which was the first agreement of its kind for the SEC. The article also examines some key regulatory developments in Australia and Asia since the time of the US-Australian Mutual Recognition Agreement.

FINANCIAL MARKETS GLOBALIZATION: THE ESSENCE AND IMPACT ON THE REGULATION OF NATIONAL SECURITIES MARKETS

Introduction. In 2020, the world experienced an unprecedented crisis caused by the Covid-19 pandemic, which affected all aspects of public life, including the financial market. The negative impact of the current crisis on individual countries is exacerbated by the significant level of globalization of financial markets, which is characterized by lower regulatory barriers and rapid capital movements between national markets. The current coronavirus crisis, like a litmus test, has highlighted the benefits of good and failings of bad regulatory policies, and that countries that have responded in a timely manner to the challenges of globalization and implemented the necessary reforms, liberalizing markets and pursuing macroeconomic policies, can benefits of globalization. Purpose. The purpose of the article is to draw conclusions based on the definition of the nature and features of globalization, methods of its assessment and potential impact on national economies in order to improve national securities market regulation policies, as well as improve cooperation between national regulators in the world. Method (methodology). The methods of analysis, synthesis, comparison, generalization, statistical data processing, as well as a graphical method of presenting scientific results were applied. Results. The essence, types and main stages of globalization are determined, definition of «financial globalization» is proposed, and conclusions regarding the strengthening of signs of de-globalization in the real sector of the economy in 2020, the first signs of which appeared after the arrival of Trump as President of the United States are made. Тhe negative and positive aspects of globalization impact on financial markets are analyzed, the problem aspects of regulation of national securities markets in the context of financial globalization are focused, the list of indicators for estimating dynamics and development of globalization in the financial aspect is defined.

Corporate Governance and Stock Market Liquidity

The purpose of this paper is to examine the capital market effects of corporate governance (CG) practices of “comply or explain” on stock market liquidity in a frontier market. Using secondary data from Nairobi Securities Exchange (NSE) liquidity position is analyzed using panel data random effects regression against CG guidelines. The results show a negative and significant relationship between CG compliance and stock market liquidity suggesting that regulated CG practices improves market liquidity in Kenya. The results are remarkably robust to different measures of liquidity and supports agency and signaling theory. We provide evidence that security regulation improves stock market liquidity in a frontier market whose characteristics are thought not to favor regulation. Therefore the regulators and stakeholders could be motivated by the benefits of regulation and this could lead to renewed effort to improve the current compliance from the current 61.4%, to higher levels. Our finding shows that security market regulation through CG guidelines can improve stock market liquidity in frontier markets. This offers regulators and policy makers a strong motivation to enhance security regulation to strengthen capital market confidence.

Contrasting Worldviews at Bank and Securities Market Regulators

Bank and securities regulators operate with different attitudes about the appropriate regulation of financial institutions and markets. Bank regulators’ prudential oversight protects depositors from worrying about the repayment of their bank claims. In contrast, securities market regulators tend to presume that security markets (almost) always clear quickly at prices close to the asset’s fundamental value. These regulators seek to assure full disclosure of information, which facilitates active securities trading. In the United States, the SEC’s investor protection duties are tailored to the financial sophistication of individual investors.

Existing Problems and Countermeasures in Financial Securities Market Regulation

At the present stage, with the continuous development of social economy and science and technology, China’s financial and securities industry has gradually developed. As an important part of China’s socialist economic market, including the financial and securities industry, therefore, to a certain extent, the development of the financial securities industry has promoted the prosperity and development of China’s economy. In other words, strengthening the management of financial securities market regulation can promote the sustainable development of the securities industry, thereby promoting the rapid development of China’s economy. This paper mainly discusses and expounds some problems existing in the current process of financial securities market regulation, and proposes solutions to it, hoping to be helpful to the financial securities industry.