The Role of Securities Regulation in the Development of the Thai Stock Market

Capital markets have the potential to be powerful engines of economic growth in developing nations. An efficient stock market provides the public with investment opportunities and mobilizes their savings, as well as international capital, for productive corporate financing. Market forces serve to discipline management and public ownership improves the accountability of the business sector. But developing a robust and efficient capital market is a difficult task for many emerging economies. One of the many challenges they encounter is creating an effective securities regulatory regime. In a mature capital market, securities regulations form the framework within which the market operates. They are designed to protect the investor, prevent systemic crises and promote the market they govern. But in what capacity do securities regulations operate in smaller, developing capital markets? The purpose of this paper is to analyze the role of securities regulation in the development of the Thai stock market. The first half of this paper provides some basic background information on the Thai legal system, stock market and economy, and then offers an analysis of the role of securities regulations in the 1997 financial crisis and subsequent process of recovery. The second half addresses the future of securities regulation in Thailand. It begins with an examination of the obstacles that face effective oversight by securities regulators and the regulators' efforts to overcome these obstacles. The paper concludes with an evaluation of the current reform initiative and a proposal for an alternative strategy. In short, this paper seeks to analyze the role that securities regulation has played, will likely play and could play in the development of the Thai stock market.