Sat, Jul 10, 2004 - Page 8 News List

Stock listing rules need to be tough

By Kenneth Lin林向愷

Differences in standards in the accounting systems, financial markets, regulations on corporate governance and market transparency are quite substantial between Taiwan and China. If regulatory authorities lower the requirements for listing in Taiwan and fail to impose a high standard of regulation on the corporate governance of the listed PRC-based Taiwanese-owned companies, risks to investors increase. Since private investors lack the ability to effectively monitor those firms' business and financial operations, the problems caused by false accounting, insufficient disclosure and the provision of misleading information can seriously affect Taiwan's financial market as well. When such cross-border market activities lack discipline and tough regulation, any further measures promoting internationalization and deregulation are unlikely to receive public support.

For now, the government should be careful not to sacrifice the general interests of society in order to increase the number of PRC-based Taiwanese-owned companies that are listed in Taiwan. It should instead put more effort into improving the environment in which firms invest and operate, strengthening discipline in financial markets to increase transparency, and introducing tougher laws to improve corporate governance. In this way they can raise investors' confidence in the capital market and boost foreign investment. If the government fails to do so, more local firms will move to China, and fewer firms will invest in Taiwan.

Kenneth Lin is an economics professor at National Taiwan University and a former finance director for Kaohsiung City.

TRANSLATED by Paul Cooper

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