Enhancing Capital Market Information Transparency in the Context of Corporate Anomalies

Abstract

Purpose: One of the most effective tools in enhancing the efficiency of the capital market is transparency in information. A lack of transparency poses significant risks to investors. Effects of reduced transparency in capital information include fraudulent practices and inadequate financial reporting. This study aims to investigate the causes of anomalies in corporations and their impact on the transparency of capital market information. Method: This research employs a qualitative approach grounded in the foundations of data theory. Qualitative data collection relies on a judicious selection of ten legal cases pertaining to the transgressions of stock companies adjudicated in the criminal courts of Tehran during the years 2013 to 2019. The purposive sampling technique is applied, and qualitative data analysis is executed through a systematic data plan grounded in foundational principles. Consequently, the elicited concepts undergo a multistage assessment encompassing open, axial, and selective coding. Findings: The codes identified in relation to causal conditions are organized into four overarching categories, comprising 31 sub-categories. In the pursuit of elevating capital market transparency, mitigating impediments within the business milieu, minimizing government ownership, and rescinding obligatory market interventions, the identified causative factors are categorized into three primary domains, encompassing 25 sub-categories. These factors illuminate the inadequacy of punitive and repressive measures in curbing transgressions and irregularities within the stock and securities markets. Consequently, the implementation of proactive and deterrent mechanisms emerges as a fundamental instrument for enhancing capital market transparency. Underlying causes are classified into three primary categories, housing six sub-categories. These underpinning factors underscore the necessity of amalgamating education-driven and awareness-enhancing initiatives, with the objective of bolstering financial literacy and inculcating principles of equity ownership. Furthermore, these factors spotlight the importance of averting the characterization of individuals as malefactors in the capital market. Weaknesses in internal monitoring mechanisms, such as lapses in the appointment of internal auditors and audit committees, engender an environment conducive to fraudulent activities. This, in turn, results in a diminishment of financial reporting quality and a reduction in the transparency of information disclosed by corporate entities, thereby augmenting market risk. Conclusion: The utilization of market regulation measures will significantly contribute to transparency in the capital market. This is because minimal and minimalistic criminal measures in the business sector not only prevent irregularities but also prevent the productive sectors of the economy from becoming inefficient.

Keywords

• information transparency
• capital market anomalies
• quality