Casino Capital - Necessary Conditions to Develop a Stock Market

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Necessary Reforms to Achieve Stock Market Development in China

In order to resolve these conditions, reforms to China’s current situation are necessary. Accounting practices must be enhanced and concentrated at enforcing these practices; by establishing a program focused on training, standard setting, and enforcing laws, rules and regulations, China’s accounting proficiency can improve. Additionally, corporate accounting and auditing procedures must be improved with concentrated emphasis on executing credibility. Legal infrastructure must also be fully developed in order to protect shareholder rights and enforce full and trustworthy disclosure of business’ operational and financial operations. This can be achieved by allowing regulators to enforce compliance by imposing penalties when companies fail to comply. Finally, more effort in improving corporate governance in needed. Establishing these reforms will boost investor confidence in the Chinese stock market.

Conclusion

As one of the most populous countries worldwide and with established market-oriented reforms that have boosted the economy, China's economy exhibits an atmosphere for developing a stock market with fair trading. The current situation in China portrays a lack of necessary conditions to establish a stock market in an emerging economy. These conditions include: establishing financial stability through healthy financial institutions, establishment of worldwide acceptable accounting and auditing standards and commitment to comply with complete and credible disclosure of businesses’ information regarding operational and financial operations, the establishment of legal systems to enforce accounting rules, regulations and disclosures, good corporate governance, and investor confidence. Although China’s current scenario lacks many of these conditions and minimizes its likelihood to establish a fair trading stock market, the detailed necessary reforms will help resolve these conditions.

References

Choi, F., & Meek, G. (2011). International accounting (7th ed.). Upper Saddle River, N.J.: Pearson Education, Inc.

Cohen, G. (n.d.). The role of the stock exchange in the economy. Zacks Investment Research. Retrieved from http://finance.zacks.com/role-stock-exchange-economy-5026.html