Research On Experience Of Development Of O.T.C. Securities Market In Taiwan Region

Taiwan has enjoyed the economic boom in the past 60 years, which grows from an unknown island farming society to a prosperous new industrialized society, with the national income jumping from $145 to $12,876. The experience of the economic development of Taiwan is not only of great importance to deepening the research of development economics theory, but also an example to countries or regions searching for the route of development.As we look into Taiwan's economic development, we can find that it is the numerous medium- and small- sized enterprises that promoted the whole economic and social development, in addition to the character of diligence of Chinese people. Economists often see the securities market as the window of a region's economy, considering that securities market is an important sector of finance and economics. The reform and development of the financial institution is not only a factor promoting Taiwan economic development, but also becomes critical in modern Taiwan economic development.Securities market, as an important sector in financial system, is responsible for the transformation of the old economic development pattern and institutional innovation, through supporting the listing of large-sized enterprises and medium- and small- sized enterprises'financing with low cost. Thus, the securities market of Taiwan has to adjust quickly and innovate its institution in order to adapt to the changing economy of the world and the special economic environment of Taiwan. For example, the securities market in early 1960s was not active enough to play a proper role, the rampant underground securities dealing in 1970s and 1980s led to"Zurich Group"fraud in which 500 thousand investors'benefits were impaired, the crazy soaring of stock prices in 1990s caused the spread of speculation and then labor force fell short, so much that the whole productive force were affected. The failure of secondary market in 2000s introduced the emerging stock market. If the institutional defects of Taiwan securities development cannot serve as the motive force of continual reform, it may become a hindrance to Taiwan's future economic development.So, it is necessary to explore the role of securities market in Taiwan economic development within the context of world economic development. Meanwhile, an objective analysis of the success and failure of the reform and development of Taiwan financial industry is of great referential significance to the reform and development of China's inland economy and securities market, which share the same culture and history with Taiwan.In the analysis, a sound theoretical base is needed. Securities market has externality, based on public interests theory, which requires the supervision department to adopt relative rules and measure to ensure the supply of securities market can satisfy public interests. And according to financial fragility theory, effective securities supervision is required to avoid insider trading and to maintain the stability, security and fairness of securities market. The game theory requires the supervision authorities to pay attention to the reasonability of cost and benefits in trading. Restrictive mechanism and incentive mechanism argue that because of the transaction cost and need of the market, in the process of realizing the aim and satisfying the need, institutional innovation will happen. Induced and imposed theories claim that when the existing securities institutional arrangement fails to achieve the expected aims, the market and government are destined to reform the institution.The supervision pattern of securities market varies from country to country. Owing to the difference of history, legal system, securities system, and supervision condition, any supervision method--------centralized legislation, self regulation, or mixed method, is grounded on the country's own subjective and objective environment. And that pattern, mixing with the respective financial, economic, political environment, laws, social values, history and culture, builds an institution with expectation value. However, with the global economies interacting more frequently, and under the concept of"global village", the construction and development of a region's supervision pattern need not keep strictly to an existing pattern of one country, but keep to the principle of promoting the current social economy and economic development, using other countries'experience for reference. This practice not only meet the requirement of international development, but also accord with the expectation of the public for a fair and reasonable market.There are three phases in Taiwan's securities development process: initial stage (1949-1962), which is from the retreat of"national government"to Taiwan to the setup of"Securities Exchange", the early form of O.T.C.market; recovery stage (1963-1987), during which O.T.C. market was closed because of economic factor at the beginning and reopened owing to the legislation of"Securities Transaction Law"in the end; developing stage (1988-2007), when GreTai Securities Market was set, credit transaction was allowed,"secondary stock market"failed and replaced immediately by"emerging stock market". Seeing from each stage, issuing, transaction, legislation, and supervision are coordinated and united, with global effectiveness.The content and emphasis of the paper are as follows:Part I, including the first three chapters: Introduction, Theoretical basis, and Literature review. The first chapter Introduction mainly discusses the paper's project, the significance of the project, subject of the research, methods of the research, framework, theoretical background, research content, emphasis and difficulties, and innovations. Chapter II is the literature review about Taiwan's securities exchange market. Actually, literature on securities is abundant, but the overall researches on the history and experience of Taiwan O.T.C. market are fairly few. So, this paper has referential value. Chapter III, the development pattern of柜台买卖securities market, mainly discusses the operating model of securities market, the history of Taiwan securities market, and the operating model of Taiwan O.T.C. securities market, in order to clarify the differences of basic concepts and institutions.Part II is from Chapter IV to Chapter VI, covering the three phases of Taiwan O.T.C. market: initial, recovery, and developing. The analysis of the three phases uses four aspects as indices, i.e. issuing, transaction, legislation, supervision, which form the factors of effectiveness. The indices of judging the success and failure are based on institutional change theory. Because the exterior and interior factors affecting history evolution are too many to judge in an absolutely scientifical way, this paper designed the integrated appraisal model, which is not perfect, and for further discussion. Part III is the last chapter, which summarizes the conclusion of three phases, and puts forward the suggestions of improving the effectiveness of future O.T.C. market by the route of conception, pattern, organization, information, and methods.The innovations of the paper lie in the following points.The innovation of research from the perspective of development of history, other than fractural research. Discussion on Taiwan O.T.C. has large amount, but all of them only discuss one aspect or one side. This paper systematically explores the overall development process of Taiwan O.T.C. market, discovering its dynamic evolution, which is still a blank in China.The innovation of dividing the history into several phases. This paper uses the initial, recovery, and developing phases to describe the history, and expounds them from four aspects of issuing, transaction, legislation, and supervision. Thus it establishes clear analysis principle, and then comes to conclusion, consequently improves the reliability of the conclusion.The innovation of research on institution change theory. The paper builds up a framework of analyzing the problem from the perspective of institutional change and systematically, comprehensively, and coherently. More important, the paper put forward the factors and variables that affecting the operation of O.T.C. market, by making a model on the basis of institutional change theory, which is by far not found in other research.The innovation of discovering the rule of history. The institutional change of Taiwan O.T.C. securities market has been compulsorily interfered by"Taiwan region government", so the author has to use a new theoretical framework-------new institutional economics and institutional change theory, in the hope to grasp the rules of evolution from the experience, and predict the future development of securities accurately.The innovation of enlightenment for mainland China to set up and develop O.T.C. securities market. At present, Taiwan region has a comparatively complete O.T.C. securities market mechanism. Studying the experience and lessons in its development is of referential value for mainland China to set up O.T.C. stock market (referring only to second board stock market or growth enterprise stock market, while O.T.C. bond market are not included). In all, this dissertation studies the experience and lessons of the development of Taiwan O.T.C. securities market, within the framework of institutional change theory and the development pattern of securities exchange. By historically assessing Taiwan O.T.C. securities market, it comes to the suggestions of improving future market effectiveness.