China's Securities Market Regulation: Analysis Based On Game Theory

Without financial market, any modern economy would not run. Securities market is the important market of financial market, the research of securities is main field modern economy. It is not have modern market economy without mature securities market. Securities market also has market failure what any market has as the core and the activity market of one country economy, so the government will intervene in it. The market failures of securities market include that financial risk and bubble aroused by Externality, information asymmetry, internal non-economic, market monopoly and manipulating. And those failures are more serious than ordinary product market. It would be solved by government regulation. The history of the securities market development of most country reveal that securities is incline to arouse moral hazard, adverse selection and opportunistic behavior because of seriously information asymmetry and non-equal duty of securities market, so securities market of modern countries is strictly regulated by their government. Transition countries need securities market to achieve their economics goal in their system transfer process. Securities market system is initiative created by government and it is a compelling institution arrangement. So the basis of the securities is weakly in law and function. China securities market is a result of compelling system transition in the process of transforming planned economy through market economy. It is not only has all characteristic of rising and transition securities market but also has it's own specialty, such as partition of share, imperfection of listed company administration, lack of credit and so on. And those specialties lead to lots of illegal behavior of Chinese securities market. Chinese securities market does not play an important role of resource allocation and advance the industry structure because of signal distorted and seriously venture behavior. Since 1st July 1999 the implement of securities act, the regulating of Chinese securities market start to administrate by law. But it does not attain to the requirement of the principle of Open, Equity and Fair because of lack the regulating ability and institution defect. Illegal behavior is pervasive in Chinese securities market. This leads to lots of system risk and break out in recently. It is important question that how to strengthen the regulating of Chinese securities market, how to protect the advantage of middle-small investor and promote the fair and efficiency of Chinese securities market.The game theory applies in lots of fields as a theory that it main interest in researching decision-making of people and equilibrium problem of thisdecision-making under reciprocity condition. It is prominent in applying in economics especially. The game theory also has applied extensively in capital market which is the main field of economics, especially in securities market. In securities market, information is most asymmetric and most important and central. It is a typical game. In this market, there are lots of players. They game with each other and want to attain to their max profit.This dissertation uses the basic principle of game theory to analyze the regulating of that based on the absorbing and referring securities market achievement in home and abroad. It founded a rent-seeking model of issue securities market. Through analyzing, we conclude that there has serious rent-seeking in Chinese securities issue market. This conclusion is accorded with the reality.In order to analyzing the illegally behavior of securities exchange market, we founded a supervised game model. Through analyzing, we conclude that if the player attains more profit than normal by illegal action, the regulating department must check strengthening. Then will decrease the illegal behavior of market player. In addition, the government also inspirits the regulation department when they success in striking illegal behavior of exchange securities market. In this way, the regulation department has motive to strike the illegal behavior of exchange securities market.Based on the analyzing of this paper, we put forward to aspect of Chinese securities market :(i) to definitude the duty of regulation department and perfect the central and uniform regulation system;(ii) to strengthen the base of legal system;(iii) to utilize the self-regulation duty of self-discipline organization;(iv) strengthen supervising force of security and implement efficiency supervise;(v) institution innovate by market-orient;(vi) strengthen supervise to regulation department.