InTeRnAtIoNaL aCcOuNtInG INTERNATIONALISATION OF THE CAPITAL MARKET

CAPITAL MARKET? A capital market is a market comprising that invest or borrow in the form of Stocks (owner’s equity) or bonds (debt). These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Financial regulators, such as the UK's Bank of England (BoE) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties. Individuals Corporate Institutions Government

FEATURES OF CAPITAL MARKET Link between savers and investment opportunities Deals in long term investments Utilizes intermediaries Determinant of capital formation Government rules and regulations

STRUCTURE OF MARKET PRIMARY MARKET Refers to the first hand issue or the fresh issue (IPO)of shares and bonds by corporation or the government. SECONDARY MARKET Deals in pre-issued securities (EXISTING) and most of the capital market transactions take place here.

SECURITY EXCHANGE BOARD OF INDIA (SEBI) SEBI is the regulator for the securities market in INDIA. It was formed officially by the government of India in 1992 with being passed by the Indian parliament. Chaired by :-C B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has northern, eastern, southern and western regional offices in New Delhi, Kolkata, Chennai and Ahmadabad.

MISSION OF SEBI Protecting the interests of investors in securities. Promoting the development of, and regulating, the securities market and for matters connected therewith or incidental thereto. Focus being the greater investor protection, SEBI has become the vigilant dog.

ROLE OF SEBI GUIDELINES SEBI is the regulator for the securities market in India , it was formed officially by the government of India. SEBI has to be responsible to the needs of three groups 1. The issuers of securities 2. The investors 3. The market intermediaries SEBI has three functions rolled into one body : quasi- legislative, quasi-judicial, quasi-executive. It drafts its regulations in its legislative capacity it conducts investigations and enforcement action in its executive function and it passes rules and orders in it judicial capacity. SEBI has been active in setting up the regulations as required under law it has also been instrumental in taking quick and effective steps in light of the global

Continued…………. The SEBI act 1992 established SEBI with statutory powers for protecting the interests of investors in securities, promoting the development of the securities market and regulating of the securities market. Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities , in addition to all intermediaries and persons associated with securities market it can conduct enquiries, audits and inspection of all concerned under the act. It has power to register and regulate all market intermediaries and also to penalize them in case of violation of the provisions of the act , rules and regulations made their under. SEBI has full autonomy and authority to regulate and develop an orderly securities markets . SEBI has come a long way since its inspection as an institution regulating the Indian capital markets. It has initiated a lot of reforms to make the market more safer for investors .

INTERNATIONALISATION OF THE CAPITAL MARKET The expansion of the capital market and its activity beyond capital market and its activity beyond political boundaries. It is done through the establishment of economic units in foreign countries by national companies resulting in development of a network between the capitals of different countries.

OBJECTIVES OF INTERNATIONALISATION ECONOMIC LINK BETWEEN CAPITALIST COUNTRIES GLOBALIZATION OF PRODUCTION EXPANSION OF INTERNATIONAL DIVISION OF LABOUR

SOURCES OF CAPITAL IN INTERNATIONAL CAPITAL MARKET PUBLIC SOURCES PRIVATE SOURCES

PUBLIC SOURCES It consists of the official development assistance, comprising grants and multilateral and bilateral loans. The world bank offers number of loans which are non-concessional. Such loans are also provided by intergovernmental agencies and regional development bank agencies. Loans from government, central bank and such agencies refers to bilateral aid. ODA or Official Development Assistance is a major source of finance.

PRIVATE SOURCES To the non-government investments by individual or companies by way of foreign direct investment and portfolio investment. Portfolio investment refers to the investment in equity or debt. Foreign direct investment is the money invested by companies in business ventures outside their home country. In India foreign investment may be done in the form of FDI, private equity, foreign venture capital investor, institutional investment in listed companies through stock exchanges, American depository receipts, global depository receipts and investment by NRI’s and PIO’s persons of Indian origin.

FEATURES AND FACTORS RESULT OF GLOBALIZATION ECONOMIC DEVELOPMENT ROLE OF ECONOMIC AND INSTITUTIONAL FACTORS IMPACT OF CAPITAL MARKET RELATED REFORMS GDP PER CAPITA INFLATION AND GOVERNMENT DEFICITS LIBERALIZATION BY THE GOVERNMENTS FINANCIAL INNOVATION AND TECHONOGICAL ADVANCEMENT CHANGES IN INVESTMENT PATTERN

RESULT OF GLOBALIZATION Since, 1991 there has been a tremendous advancement in the field of technology that enabled the conduct of foreign operations speedily with countries like Hong Kong, Singapore, Japan, America, and the U.K. becoming the hub for capital flow globally. Today labor and capital flows among countries and corporations with an unprecedented pace and amount. Therefore capital flows, production and service activities, commercial and technological developments attain international character. Billions of dollars can be transferred with only one “click”. In this framework the dimensions and the domain of the competition that enterprises face change inevitably, enterprises become international, production and service activities, and international horizontal integrations increase.

INTERNATIONAL CAPITAL MARKET’S AND ECONOMIC DEVELOPMENT The developing countries often experience a low savings rate on account of lower levels of income which makes them capital deficient. The deficit is removed by the influx of foreign surplus funds from more affluent economies. Deregulation helped in attracting more foreign money as in case of India, when the liberalization in the context of the Indian capital market was initiated in 1992. The relationship between productivity growth and private capital flows appears to have strengthened over time. The productivity benefits of capital flows—through the transfer of technology and management techniques and the stimulation of financial sector development—are significant in countries where a developed physical infrastructure, a strong business environment, and open trade regimes have facilitated the absorption of those flows. There has been considerable debate in the academic literature as to whether capital flows promote economic growth. The average growth rate among developing countries remained stable at a relatively low level during the capital flows boom of the 1990s, although the more advanced middle-income countries that received the bulk of private capital flows did achieve faster growth.

ROLE OF ECONOMIC AND INSTITUTIONAL FACTORS In developing countries, poor investment environment has been the reason for flight of capital and increase resort of international financial services. If the stock market does not function in a regulated manner investors will seek international capital instruments to play safe. The growth of ADRs has been attributed to poor stock markets n the developing countries. A positive domestic environment will spin foreign investors to divert their funds and this will provide a force to the development of a international capital investment base.

INFLATION AND GOVERNMENT DEFICIT Economies with higher inflation rate and government deficit are although deficient in financial resources, yet they are not in the positions to attract foreign capital. Countries with a favorable economic environment have a better developed capital market with participation of foreign investors. GDP per capita Economies with a higher per capita GDP have better international capital investment as the investment climate is growth oriented and often attractive returns to investors. Theoretically we argue that money flows from the affluent pockets to the deficient economies but in practice investors prefer playing safe by diverting funds to safer investment areas.

LIBERALIZATION BY THE GOVERNMENT Not only restrictions on international financial transactions have been relaxed, but regulations constraining the operation of domestic financial markets have been removed as countries have moved away from policies of financial repression. Domestic and international financial liberalization have generally gone hand in hand.  The liberalization of capital markets—and, with it, likely increases in the volume of an international capital flows. The rise in the viability of capital through offshore markets forced developing countries to liberalize and allow foreign entrants to their financial markets.

FINANCIAL INNOVATION AND TECHNOLOGY ADVANCEMENT Technology has played a great role, Revolutionary changes in information and communications technologies have transformed the financial services industry worldwide. Computer links enable investors to access information on asset prices at minimal cost on a real-time basis, while increased computer power enables them rapidly to calculate correlations among asset prices and between asset prices and other variables. Improvements in communications technologies, assisted by computerization have facilitated reduction in transaction costs and have wide trading.

CHANGES IN INVESTMENT PATTERN Bank deposits were a popular and common investment mode but with the emergence of non-banking financial institutions like insurance companies, mutual funds and pension funds investor have been provided with the opportunity of diversifying their investment and earning rate of return that minimize their risk.

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