International Harmonization of Disclosure Rules for Cross-Border Securities Offerings: A Chinese Perspective
Corporate Governance Law Review, Vol. 1, No. 2, pp. 245-303, 2005
Posted: 23 Nov 2005
This article discusses disclosure rules that must be followed by a company undertaking an equity offering in a world of interacting securities markets, in light of theoretical predictions and empirical data. It aims at making a contribution by providing a brief survey and analysis of the relevant issues. Several new study methodologies are applied in this article. To understand the securities market, this article agrees that the question should be analyzed in terms of the broadly accepted principles of modern financial economics, as most of the previous literatures did. Then, this article will go beyond economic theory and make a particular analysis from a perspective of international law. This article examines the internationalization of the securities market in a larger environment - globalization. Comparison between the international securities market and other comparatively more harmonized areas may make some sense. Most of the existing literature was written by scholars from developed countries especially the United States, while this article would like to stand on the developing country's point of view, taking China as an example for exploration. China is the central reference case in this article. The robust debate over recent years concerning the evolution and best-model regulation of securities markets has largely ignored the important case of China. The Chinese stock market deserves international attention since China is different from any western country, even its East Asian neighboring countries. Therefore China's case provides us with an opportunity to view the international harmonization efforts towards disclosure rules for cross-border securities offerings from a different perspective. This article focuses on China here as an example of a country with an emerging market and different culture in the interacting world of securities markets.
This article tries to search for an optimal regulatory approach for regulating cross-border securities offerings. After theoretically comparing the different disclosure regulatory approaches, the article addresses efforts that have been made to regulate or standardize the world's markets on a regional and international level. Then, this article explores where we should go next in the quest for creating more effective harmony in a truly globalized marketplace. It does not advocate one arguably extreme arrangement for this issue, but it believes there must be one good arrangement. This article searches for a level playing field, arguing theoretically, that harmonization rules should aim at providing an appropriate level of competition, that is, a more balanced approach to the regulatory system. This proposition for a balanced approach is well supported by the specific case of the Chinese securities market. In practice, such a balanced approach can be well achieved by improving the International Disclosure Standards and reforming the IOSCO. Further, this article urges the IOSCO to conduct a corporate governance impact assessment and a cultural impact assessment for the international harmonization programs, with due regard to countries with emerging markets. Based on such assessments, some issuer's jurisdiction related accommodations may be explicitly referred to and listed in the International Disclosure Standards. The IOSCO and its harmonization programs should not ignore the impact from international diversity.
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