ABSTRACT

This chapter investigates the role of the securities market in relation to corporate governance. It examines the theoretical aspects of the securities market and its regulations. The chapter also analyzes the important role played by the securities market in the economy, and its value-creating capacity. As a transitional and emerging economy, the People's Republic of China has merely 20 years of history in the capital market. The Chinese Authority wishes to improve the corporate governance of State-Owned Enterprises (SOEs) by listing SOEs on the domestic stock exchanges. The chapter illustrates the rationalities behind the development of the securities market, and then analyzes significance of its supervisory function over the management of listed companies. One can acutely sense the degree of volatility of China's capital market when comparing these figures with the record of index fluctuation in a mature market. Yet, takeovers themselves merely provide an external mechanism for corporate governance and should be employed only as a last resort.