The Role of Self-Regulation in Supporting Korea’s Securities Markets

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Black, Bernard S.
Issue Date
BK 21 law
Journal of Korean Law, Vol.3 No.1, pp. 17-38
This short article was initially prepared for a December 2001 conference sponsored by the Korea Stock Exchange (KSE). It reviews the scope of self-regulation by stock exchanges and offers suggestions for the main Korean stock exchanges, the KSE and the KOSDAQ. I argue that self-regulation should be

understood broadly to include regulation of listed companies through quality standards, disclosure standards, and governance rules; regulation of broker-dealers; regulation of trading; and, perhaps most basic, regulation of the exchange’s organizational structure. The most important elements of selfregulation

are regulation of listed companies and the exchange’'s organizational structure (which impacts its incentives to engage in other forms of self-regulation). To compete for trading in shares of cross-listed

Korean companies, Korea will need both legislative change and stronger self-regulation of listed companies. The government should amend the Securities Transaction Law to repeal the securities

transaction tax and permit demutualization of the KSE and the KOSDAQ. The government and the stock exchanges must upgrade both the on-the-ground reality (which will lag behind changes in formal rules) and investor perception (which will lag behind the on-the-ground reality) of Korea’'s disclosure and

corporate governance regime. Stronger listing standards can be important components of that investor protection effort.
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College of Law/Law School (법과대학/대학원)The Law Research Institute (법학연구소) Journal of Korean LawJournal of Korean Law Volume 03 Number 1/2 (2003)
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