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ENQUIRE PROJECT DETAILS BY GENERAL PUBLIC |
| Project Details |
| Funding Scheme : | General Research Fund | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Number : | 452913 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Title(English) : | Public Enforcement of Securities Laws in China | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Title(Chinese) : | 中國證券法律公力執法研究 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal Investigator(English) : | Prof Xi, Chao | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal Investigator(Chinese) : | 習超 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Department : | Faculty of Law | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Institution : | The Chinese University of Hong Kong | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| E-mail Address : | chaoxi@cuhk.edu.hk | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tel : | 39431142 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Co - Investigator(s) : |
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| Panel : | Humanities, Social Sciences | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subject Area : | Social Sciences | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise Year : | 2013 / 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fund Approved : | 734,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Status : | Completed | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Completion Date : | 30-6-2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Project Objectives : |
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| Abstract as per original application (English/Chinese): |
The aim of this project is to explore the ways in which Chinese securities enforcement agencies have taken enforcement actions against violations of securities laws.
Effective enforcement of securities laws helps to deter securities fraud and to offer protection for minority investors. Securities enforcement actions can be brought by public and regulatory agencies such as the securities regulator and the stock exchange (“public enforcement”) or by private parties through civil lawsuits (“private enforcement”), or both. Recent comparative studies show that the nature and the structure of securities enforcement actions vary greatly from country to country. In the case of China, public enforcement actions are evidently greater in number, and possibly also in intensity. Academic attention has so far, however, concentrated primarily on the enforcement of securities laws by private lawsuits. Public enforcement of securities laws in China remains relatively understudied and under-theorized.
The particular focus of this project will be on the enforcement actions, both formal and informal, by the China Securities Regulatory Commission (“CSRC”) and the Shanghai Stock Exchange and the Shenzhen Stock Exchange (“Stock Exchanges”). Drawing on two unique datasets to be constructed on formal enforcement actions, as well as qualitative data on public enforcement activities to be obtained with the support of a network of collaborating PRC securities regulators, this project will present new insights into, among other things, the intensity of public securities enforcement, the determinants of the public enforcement agencies’ regulatory activities, and the impact of public enforcement actions on regulated firms and individuals in China.
It is anticipated that this project will, based upon its systematic, empirical and comparative analysis of public securities enforcement actions in China, propose a more grounded theory for understanding the role that public enforcement of securities laws plays, relative to private enforcement, in the development of national securities markets, with particular reference to China. The theoretical and empirical findings of this project will also contribute to the optimal design of the securities enforcement regime in China and, more generally, to the growing comparative literature on securities regulation, law and finance, and law and development. 本課題旨在研究中國證券執法機關對於證券法律違法行為的執法問題。 證券法律的有效執法，對於遏制證券欺詐和保護中小投資者，發揮著舉足輕重的作用。證券執法既可以由公共執法機關和監管機關（例如證券監管部門和證券交易所）執行，也可以由私人通過民事訴訟的方式實現。前者稱為“公力執法”，而後者稱為“私力執法”。近年的比較證券法研究表明，世界各國證券執法制度的內涵和模式迥異。在中國，公力執法案件在數量上遠高於私力執法案件，公力執法的執法力度似乎也強於私力執法。然而，對於中國證券法律執法的現有學術研究，主要集中於通過民事訴訟方式實現的私力執法。對於中國證券法律的公力執法，研究深度和理論化程度，尚有待提升。 本課題的研究，著重於中國證券監督委員會、上海證券交易所和深圳證券交易所的正式和非正式的證券執法行為。本課題將致力於建立中國證券法律正式公力執法資料庫。同時，本課題將依託與中國主要證券監管機關的合作網路，深入實際瞭解證券公力執法行為。在此基礎上，本課題將推動對中國證券法律公力執法現狀、證券執法機關執法行為的決定因素、證券執法機關執法行為的影響等重要問題的研究。 同時，本課題對於中國證券法律公力執法系統化的、實證性的和比較視野的研究，還將推動相關領域理論研究的發展，特別是證券公力執法和證券私力執法在一國證券市場發展過程中的相互作用關係的研究問題。此外，本課題的理論和實證研究成果，還將對中國證券執法體系的最優制度設計，以及比較證券監管、法律與金融、法律與發展等學術領域的發展，發揮積極的促進作用。 |
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| Realisation of objectives: | The quantitative and qualitative investigation undertaken for this project was guided by, and directed towards fulfilling, the project’s five objectives, which were achieved in full. The research achievements are summarised below in the sequence of the five objectives. Objective 1: Methodologically, this component of the project relied primarily on materials derived from secondary sources. It resulted in the creation of a unique archive that traces documentarily the evolution and operation of the public institutions/bodies tasked with the enforcement of securities laws. This archive includes not only readily accessible published materials, such as monographs, yearbooks, journal articles and newspaper entries, but also materials that are ‘internal’ in nature and yet unclassified or otherwise confidential. These materials are thus particularly useful for gaining insight into the development of the securities enforcement regime as it existed in the early days of China’s securities markets. Another valuable feature of the archive is that the secondary materials it houses are supplemented by elite interviews. Interviews were conducted with senior and rank-and-file officials, both serving and former, of the public bodies involved in the set-up and reform of China’s securities enforcement regime. They thus shed light on the underlying, often times undocumented, considerations that account for the institutional changes seen in that regime. The findings arising from this component of the research laid a solid foundation for the successful achievement of the project’s other four objectives. They were also drawn upon in the peer-reviewed publications and conference presentations resulting from the project. Objectives 2 & 3: These objectives were successfully achieved through the construction of a proprietary dataset (‘Dataset’) containing all enforcement actions, both formal and informal, taken by the China Securities Regulatory Commission (CSRC), its regional offices and the Shanghai and Shenzhen Stock Exchanges from 1998 to 2016. As a matter of fact, what has been achieved considerably EXCEEDS the specific objectives set out in the original proposal (‘Proposal’) in two important respects. First, the period of investigation stated in the Proposal was 1998-2012. The Dataset has, however, significantly extended the period by four years, stretching to 2016. That significant extension in effect DOUBLES the size of the Dataset. In number terms, the additional four-year period (2013-2016) contributed around 3,900 enforcement actions, more than the nearly 3,800 recorded during the whole of the original period of investigation (1998-2012). Second, the proposed datasets as stated in the Proposal did not seek to systematically collect data on the informal enforcement activities carried out by the CSRC and its regional offices (vis-à-vis the two Stock Exchanges), owing to issues with data availability at the time of the Proposal’s drafting. Thereafter, however, concerted efforts were made to identify and access new data sources, with considerable success. The Dataset thus records various categories of such informal enforcement actions as oral warnings and ‘supervisory talks’, which to the best of my knowledge had not hitherto been captured in a sophisticated manner in the existing literature. Another important feature of the Dataset is its comprehensiveness. It is considerably more comprehensive than any commercial, subscription-based database currently available. The Dataset contains close to 8,000 publicly accessible enforcement actions. By contrast, CSMAR and WIND, the two leading commercial databases that are widely used in the related literature, record just over 4,400 and 1,300 enforcement actions, respectively, during the same period. Although wide-ranging, the Dataset’s enforcement actions did not, in their original form, include many of the variables needed to address the research questions posed in this project. Therefore, a very large body of additional data was collected on a cohort of selected independent variables. These include each culpable firm’s characteristics, e.g. market capitalisation, ownership structure, industry, financial performance, identity of the ultimate controller, and relationship with the regulatory authorities, as well as the personal profiles of its senior office holders. They also included such external factors as the level of media scrutiny the alleged violations received. The identification and selection of these explanatory variables were guided by the research questions the project sought to address. Due to the significantly increased size of the Dataset and the uneven quality of the data sources, data processing was a time-consuming and labour-intensive process. Feedback from conference presentations and elite interviews, whilst constructive, also led to additional steps being taken to further improve data-processing, which entailed a further significant time investment. Despite these many challenges, the project was successfully completed. The empirical findings resulting from a methodologically robust analysis of the proprietary Dataset successfully addressed the many specific research questions that the project set out to answer in relation to its objectives. They also provided robust empirical evidence, on which the project’s peer-reviewed publications and conference presentations relied. Objective 4: Elite interviews were the primary method adopted to elucidate the complex dynamics between the enforcement agencies and regulated firms and individuals, as well as the other stakeholders involved. My interviewees included two selected cohorts of CSRC and Exchange officials in consideration of the formal and organisational separation between the ‘investigative’ and ‘adjudicative’ roles within their enforcement programmes. Thus, the first cohort comprised CSRC/Exchange officials involved in the investigation of securities violations, whilst the second comprised officials and CSRC/Exchange-appointed ‘judges’ responsible for adjudicating allegations of securities violations based on the investigation outcomes. Interviews were also conducted with a variety of stakeholders to determine how they had been affected by, and had reacted to, enforcement actions and how they had attempted to influence the decision-making of the enforcement agencies. These stakeholders included the state agencies concerned at both the central and local levels, as well as the providers of legal, accountancy and financial services. The elite interviews proved to be particularly useful for successfully achieving Objective 4. They helped to gain otherwise unobtainable insight into a number of under-documented, yet important, aspects of enforcement activities. These include for example, the nature and forms of interaction with, and intervention by, regulated firms and individuals, as well as concerned government agencies at various levels, that may have inhibited the CSRC/Exchanges from making decisions as independently as they would have liked. The interview results thus added important nuances to the findings pertaining to Objectives 1, 2 and 3. Objective 5: The quantitative and qualitative findings described above laid a solid foundation for conceptualising and generalising the case of public securities enforcement in China, thereby helping to successfully achieve the project’s final objective. In particular, the unparalleled scope and scale of the project’s data on enforcement actions, both formal and informal, enabled this research to challenge conventional wisdom, which is based largely on a narrower conceptualisation of securities enforcement actions and a considerably smaller pool of enforcement activities. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of objectives addressed: |
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| Research Outcome | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Major findings and research outcome: | The major findings of this research can be summarised as follows. - It shows empirically that firms of a larger size, firms that are controlled by the state, firms that are more politically embedded, and firms that cooperate with the securities regulators face a lower probability of being targeted for enforcement and a higher likelihood of lenient enforcement. It also demonstrates that, counter-intuitively, a closer personal bond with the securities regulators is likely to intensify the severity of enforcement actions and unlikely to reduce the likelihood of being targeted in the first place. - It demonstrates empirically that investors’ reactions to information on enforcement actions taken against the firms in which they have invested are crucially dependent on the manner in which that information is released and disseminated. More specifically, Chinese investors react negatively to such information when it comes directly from their invested firms. When it is channelled through the regulators taking the actions, in contrast, investors remain indifferent until the financial media take an interest. - It shows empirically that weak public enforcement of the corporate governance code by the regulatory authorities is an important contributing factor to the failure of corporate governance initiatives (e.g. cumulative voting) intended to protect minority shareholders from a cohesive majority. - It demonstrates that the evolutionary trajectory of China’s public securities enforcement programme has been shaped by the complex dynamics between the programme’s aspiration to adopt a US-style, enforcement-led securities regulatory regime and the Chinese securities regulators’ traditional developmental role. - It depicts the changing patterns of the CSRC’s formal enforcement activities, suggesting that the CSRC has emerged as an adaptive regulator willing and able to develop new strategies and shift its enforcement priorities as market conditions evolve. - It posits that the public enforcement of securities laws has played a much greater role than private securities enforcement in the development of China’s securities markets, although its effectiveness is conditional upon various institutional constraints and dynamics. The research outcomes of the project include: - Five articles published/accepted for publication by prestigious peer-reviewed journals and edited volumes published by prestigious academic publishers; - Three keynote addresses and three invited public lectures; - 20 presentations at internationally recognised conferences organised by premier research institutions; and - Three articles under review by prestigious peer-reviewed journals. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Potential for further development of the research and the proposed course of action: |
As elaborated above, the project’s Dataset is considerably more comprehensive than the leading commercial, subscription-based databases widely used in academia and industry. It thus presents a much fuller, more nuanced picture of China’s public securities enforcement regime. The Dataset therefore has significant potential for knowledge transfer activities. Potentially interested parties include Chinese legislators and policymakers (as Chinese securities legislation is undergoing a major overhaul), Chinese securities regulators, Chinese investors (both retail and institutional), and Chinese listed firms and their service providers. Global investors are also likely to be interested, for they are gaining more significant exposure to China’s securities markets as the country steps up its efforts to open up its markets to overseas investors, as most recently manifested by the addition of mainland Chinese listed firms by global index provider MSCI to its widely followed emerging market index. Preliminary discussions have been undertaken with potential collaborators in full compliance with RGC and University rules should knowledge transfer activities materialise. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Layman's Summary of Completion Report: | The effective enforcement of securities laws helps to deter securities fraud and offers protection to minority investors. Enforcement actions can be brought by public and regulatory agencies such as the securities regulator and the stock exchange, or by private parties through civil lawsuits, or by both. This project focuses on the ways in which the Chinese securities enforcement agencies have taken enforcement actions against violations of securities laws. It offers new insight into, among other things, the intensity of public securities enforcement, the determinants of the public enforcement agencies’ regulatory activities, and the impact of public enforcement actions on regulated firms and individuals in China. Based on a systematic, empirical and comparative analysis of public securities enforcement actions in China, the project proposes a more grounded theory for understanding the role that public enforcement of securities laws plays, relative to private enforcement, in the development of national securities markets, with particular reference to China. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Research Output | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Peer-reviewed journal publication(s) arising directly from this research project : (* denotes the corresponding author) |
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| Recognized international conference(s) in which paper(s) related to this research project was/were delivered : |
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| Other impact (e.g. award of patents or prizes, collaboration with other research institutions, technology transfer, etc.): |
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| SCREEN ID: SCRRM00542 |