New financial regulatory philosophy: A paradigm shift in securities market supervision

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Abstract

The objective of this paper is to identify the changes in the financial regulatory philosophy in the securities market supervision after the 2008 global financial crisis. The mix-methodology researches are concluded by interviewing 101 securities regulators to investigate the impacts of the crisis on securities market supervision philosophy. Evidence is found to support the hypothesis that the 2008 global financial crisis has created a paradigm shift from standard finance to behavioural finance in securities supervision. However, regulators are still in a philosophical crisis when the theoretical ground they once believed turned out to be not suitable for the securities supervision. The analysis undertaken in this paper contributes to apprehend the theoretical aspects of the paradigm shift and constructs a pertinent financial regulatory philosophy, which observes the nature of securities markets, responds to the problems revealed by the 2008 global financial crisis, and takes into consideration the nature of emerging markets. Consequently, this paper proposes a multi-fold theoretical ground within the Keynesian regulation framework to be adopted for the construction of a securities market supervision philosophy in order to efficiently cope with market developments and be resilient to financial crises.

Keywords: Securities Market Supervision Philosophy, Behavioural Finance, Standard Finance, Global Financial Crisis, International Organisation of Securities Commissions

Authors’ individual contribution: Conceptualization – P.D., J.L., and I.E.; Methodology – P.D., J.L., and I.E.; Writing – P.D., J.L., and I.E.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: This paper extended the research project “Impacts of 2008 GFC on securities market supervision and implications for emerging markets: Regulatory perspectives” which was sponsored by the Australian Government through Endeavour Award. We would like to thank the valuable comments and suggestions made by the editors and reviewers of the journal.

JEL Classification: G01, G15, G41

Received: 21.02.2020
Accepted: 30.04.2020
Published online: 04.05.2020

How to cite this paper: Duong, P., Liu, J., & Eddie, I. (2020). New financial regulatory philosophy: A paradigm shift in securities market supervision. Corporate Ownership & Control, 17(4), 8-17. https://doi.org/10.22495/cocv17i4art1