Comparative study of Securities & Exchange Board of India with developed market regulators

Abstract

According to Douglass North (1990, p. 3), “Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction.” There are significant differences in the economic and political environment of different countries which fundamentally alter the way the nature of the institutions prevailing in these countries. There are multiple studies (Djankov et al. (2002); Mauro (1995)) which shows strong correlation between institutions and economic performance. Djankov et al. (2002) Founded in 1999 the cost of opening a medium sized business in US was. 02 percent of GDP per capita as compared to 2.7 percentage in Nigeria 1.16 percentage in Kenya 91 percentage in Ecuador 4.95 percent in Dominican Republic. the high cost of opening a business which translates into high entry barriers are highly correlated with the corresponding economic growth and the level of development in these countries. However, one cannot say for sure that the economic development in a country is only dependent on the strength of the institutions as many other exogenous variable such as social and cultural differences also play a major role. Crash. According to Tarun Khanna et al., Multinational corporations from developed countries often face issues of internationalization, especially when venturing into developing economies due to “institutional voids”, which is the absence of specialized intermediaries, regulatory systems, and contract-enforcing mechanisms. Improving the institutional infrastructure in a country i.e strengthening regulatory bodies, improving contract enforcement, security of property rights and maintaining rule of law reduced the uncertainty in the market environment to a greater extent. Even though developing economies continue to bridge these institutional voids to attract foreign investments and reduce the uncertainty among investors, there still is a long way to go before these institutions become completely autonomous and strengthened to handle complex issues.The objective of this study is to understand and analyse a key institution in India i.e. the Securities and Exchange Board of India (SEBI). Securities and exchange Board of India is the regulator for securities market which was established in 1998 and was given statutory powers SEBI Act 1992. As per preamble of SEBI, its basic functions are “.to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto". In this study, we aim to some of the crucial areas of SEBI such as insider trading, regulation of financial markets, governance structure and corporate governance with respect to its counterparts in developed markets.