Stock Market Rent-seeking Behavior

Rent-seeking behaviors are directly unproductive profit-seeking activities resulting in the loss of social welfare. It was put forward and expounded systematically by Tullock. Gorden and Krueger. Anne in 1974. Thereafter, many economists, including Tollison, Posner, Bhagwati and Buchanan who attained Nobel Prize in 1986, developed the theory of rent-seeking. The theory was gradually applied to sociology, politics and economics. As a rapid gain way in the unproductive field, rent-seeking activity is often taken to obtain profits by securities market's participants. Since the last 90's, rent-seeking behavior is popular in china's securities market. It is mainly evinced by securities issue qualification, issue pricing, issue structure in the primary market, and evinced by stock price manipulating, government intervening, untrue information revealing of listed corporation in the secondary market. Rent-seeking behavior in the securities market is caused by market monopoly, unreasonable institutions and universal informational asymmetries. In China, the defects in system, structure, function, law and property rights of securities market bring about a great quantities of rent-seeking behaviors. The informational asymmetries between institutional investors and individual investors, between investors and listed corporations, between listed corporations and securities supervisory department also lead to popular rent-seeking behaviors. Rent-seeking behavior seriously breaks the securities market orders, distorts resource arrangment, increases more transaction costs. Therefore, to limit and reduce the rent-seeking behavior in the securities market, we should prefect securities market institution by reforming securities issue institution, improving governance structure of listed corporation, strengthening securities supervision. Moreover, we should also reduce the asymmetric information in the securities market by enlarging information revealing of corporations, instituting reputation system, enhancing transparency of government policies, instituting reasonable and complete system of securities supervisory rewarding and punishing.