Shareholding in EU: is “indirect holding” approach appropriate in achieving financial integration?
| Published date | 04 February 2014 |
| Pages | 15-25 |
| DOI | https://doi.org/10.1108/JFRC-10-2012-0040 |
| Date | 04 February 2014 |
| Author | Georgios P. Kouretas,Christina Tarnanidou |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
Shareholding in EU: is “indirect
holding” approach appropriate in
achieving financial integration?
Georgios P. Kouretas and Christina Tarnanidou
Department of Business Administration,
Athens University of Economics and Business, Athens, Greece
Abstract
Purpose – The purpose of this paper is to focus on the specific “shareholder’s” concept of
transparency.
Design/methodology/approach – It considers that indirect securities holding systems limit the degree
of “post-trading” transparency. Themain concern is thatan adverse effect ofglobalized capitalmarkets is
that theactual shareholdersare not registered inthe official registriesand registrationsare effected in the
name ofintermediariesacting on their behalf.It further considersthat new EU legislative actionshould be
taken to address the legal issues of securities holdings as a key parameter for EU i ntegration.
Findings – A new architecture of the securities holding system is proposed in this paper to be
adopted at the EU level on the basis of the analyzed direct registration, i.e. registration of all the actual
shareholders in the registries. It is considered that this architecture will promote securities holdings
transparency for all systems, either direct or indirect, and hence enhance investors’ protection and
financial confidence in the markets. Focusing on the financial crisis of the recent years, it is worthy of
note that a key parameter in solving this crisis problem could be considered not only the imposition
of more possible regulatory requirements on all financial players but also the improvement credibility
of the markets by making their operation more transparent. Direct registration could be defined as a
method of making the markets more transparent in this regard.
Originality/value – In the light of the financialcrisis of 2007-2009, this is one of the first studies, which
clearlyargues that direct registration couldbe considered the appropriate methodof making the financial
marketsmore transparent. Therefore, it calls for the EU legal interventionshould therefore be accelerated.
By delaying improvement in the efficiency of the available infrastructures mainly by utilizing all the
advantages that technologyoffers, the markets accept the additional cost of higher risk coverage.
Keywords Corporate governance, EU legislation,Indirect holding approach, MiFID,
Shareholder’stransparency
Paper type Research paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
JEL classification – K22, G32, G34
An earlier version of the paper was presented at the International Conference on “Improving
financial institutions: the proper balance between regulation and governance”, Hanken School of
Economics, Helsinki, 19 April 2012 and at the Conference on “Research on economic theory and
econometrics”, Milos, 11-15 July 2012 and the authors thank the participants for valuable
comments. Kouretas acknowledges financial support from a Marie Curie Transfer of Knowledge
Fellowship of the European Community’s Sixth Framework Programme under contract number
MTKD-CT-014288, as well as from the Research Committee of the University of Crete under
research Grant No. 2257. The authors thank without implicating Eva Banincova, George Bitros,
Bonnie Buchanan, Harris Dellas, Miriam Garnier, Alberto Franco Pozzolo, Chris Redmond,
Kenneth Spong and George Tavlas for valuable comments and discussions. The authors also
thank an anonymous referee for many helpful comments that improved the manuscript
substantially. The usual caveat applies.
Journal of Financial Regulation and
Compliance
Vol. 22 No. 1, 2014
pp. 15-25
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-10-2012-0040
Shareholding
in EU
15
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