Liu Jipeng: Why Has the Indian Stock Market Been So Strong in Recent Years? It's Closely Related to Its Strict Delisting System

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Special Topic: Strengthening the Protection of Small and Medium Investors’ Rights — Sina Finance 3.15 Investor Protection Forum

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On March 13, the Sina Finance 3.15 Investor Protection Forum was held. Liu Jipeng, Professor at the Business School of China University of Political Science and Law and a well-known expert in the capital market, delivered a keynote speech. Liu Jipeng stated that the delisting process must be intensified, but the prerequisite is to establish a sound compensation system to hold wrongdoers accountable and effectively protect retail investors’ interests.

The Compensation System Needs Urgent Improvement, Funding Sources Are Key

Liu Jipeng pointed out that the core issue facing current delisting systems is the lack of a complete compensation mechanism. “We need to increase the exit efforts, but the prerequisite for delisting is to first establish a compensation system.” He paid particular attention to the source of compensation funds and suggested setting up a dedicated compensation fund to safeguard the legal rights of retail investors.

In Liu Jipeng’s view, retail investors, as a vulnerable group with information asymmetry, are often the biggest victims during the delisting process of listed companies. Establishing a special compensation fund can, to some extent, make up for their losses and maintain market fairness.

Identify “Wrongdoers” Clearly and Strictly Punish Controlling Persons and Intermediaries

“Can we really hold these wrongdoers accountable for compensation?” Liu Jipeng explicitly pointed out the two main entities that need to be held responsible.

First are the major shareholders and actual controllers of listed companies. Liu Jipeng believes that as the leaders of the enterprise, they bear primary responsibility for the company’s operations and information disclosure. If violations lead to delisting, they should be responsible for compensation.

Second are intermediary agencies. Liu Jipeng emphasized the importance of “third parties” — “These third parties include our accountants, as well as lawyers, appraisers, etc. Without their assistance, false reports cannot be produced.” He pointed out that as gatekeepers of the capital market, if intermediaries lose their independence and professionalism and collude with listed companies to falsify information, they must pay the price for their actions.

Learn from International Experience and Increase Penalties

Liu Jipeng mentioned cases of penalties against accounting firms in the U.S., such as the downfall of Arthur Andersen, demonstrating the zero-tolerance attitude of mature markets toward violations by intermediaries.

He also acknowledged some progress made domestically: “We also have cases of penalties against securities firms, and we need to consolidate and intensify these efforts.” However, he believes that current penalties are still far from enough and must be further strengthened to create an effective deterrent.

Delisting Is Not the End; Revaluation of Value Is Essential

Liu Jipeng also presented a unique view: delisting should not be too easy. “Everyone in business knows that before closing down, the biggest fear is being investigated. First, they check you thoroughly and re-evaluate your value.”

He cited India’s stock market as an example, noting that its recent strong performance is closely related to its strict delisting system. Companies must undergo comprehensive review and revaluation before delisting, which not only better protects investors’ rights but also prevents companies from escaping responsibility through delisting.

Liu Jipeng concluded by emphasizing that improving the delisting system is a systematic project that requires joint efforts from regulators, judicial authorities, market participants, and others. It is necessary to streamline delisting channels, improve market efficiency, and establish a comprehensive investor protection mechanism. Only by making violators pay the price can we truly achieve the healthy evolution of the capital market through the survival of the fittest.