REVIEW

OF
SECURITIES MARKET IN BANGLADESH: A CRITICAL APPRAISAL OF ITS
GROWTH SINCE ITS INCEPTION IN 1954

By
Khondokar Abu Saleheen (ZR-14), MBA 53D
Sajid Shafique (ZR-30), MBA 53D

Course: Financial Theory and Practice

Course Code: F501

Institute of Business Administration, University of Dhaka

Date: 09-September-2015
Article Review of: Solaiman. S. M. (2005). Securities market in Bangladesh: A critical
appraisal of its growth since its inception in 1954. Savings and Development, 29 (2), 169198.
Article Summary
In the article titled: Securities market in Bangladesh: A critical appraisal of its
growth since its inception in 1954, the author seeks to discuss the growth of the securities
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market in Bangladesh since its establishment in 1954 and show that it has failed to achieve
any significant growth despite its long term operation. The growth of the market was
measured by observing the growth pattern of listed companies in the secondary market, the
number of companies going public and the amount of public issues. Major regulatory reforms
related to the securities market that have been undertaken over the years have been discussed
in details. A comparative study of the Bangladesh securities market amongst its selected
Asian counterparts was also included to show the relative growth of the market with respect
to those countries. On the basis of the information of the study, the author concluded that the
Bangladesh securities market has failed to achieve any significant growth since its inception.
This stagnation in growth was attributed to a number of factors, such as: weak legal and
regulatory frameworks, widespread corporate malpractice, absence of active market
professionals, the predominance of individual investors, and a serious dearth of foreign and
institutional investors. The author identified that over the years the reforms were mostly
concentrated on incentives to the investors and issuers alike, but nothing significant has been
done for investor protection. As such recommendations were made to provide proper investor
protections for the restoration of public confidence in the securities market of Bangladesh and
accelerate its growth.
Critical Reflections
The dominant purpose of this article is to discuss the inception and growth of the
Bangladesh securities market and educate the reader about the insignificant growth of the
market despite its long term operation. In declaring the objective the author was clear and
precise.
The article did not mention any separate literature review or clear research
methodology and whether the data collected were primary or secondary which is a major
limitation. But ample in text citations were used and description in the article body referred
that the data used were mainly secondary obtained from various sources. A separate and well
defined literature review and methodology would have been more helpful for the reader.
In order to highlight his point the author divided the article into well divided distinct
headings. Additionally ample visual representations such as tables and graphs were provided.
These helped to understand the authors perspective more clearly.
In the article, firstly, the author discussed about the establishment of the Securities
market, namely- the Dhaka and Chittagong stock Exchanges (DSE and CSE). Secondly the
author scrutinized the growth of the market for the period 1976-1996 and discussed the
establishment of the Securities and Exchange Commission (SEC). The author pointed out
the stock market crash of 1996 and outlined the various reforms that took place in its after
math. But the reasons behind the crash were not discussed in detail. In the next part, the
author highlighted how the reform measures failed to accelerate market growth from 1997 to
2002; next, a graphical representation of the market growth from 1976 to 2002 was provided,
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measured by the number of listed and tradable securities; and issued capital and market
capitalization. Additionally, the author also provided a table to illustrate the growth of public
issue market. After that a comparative study of the Bangladesh securities market was
provided amongst its selected Asian counterparts to highlight its poor performance.
Finally, based on the research, the author concluded that the growth of the market
since its inception is considerably insignificant. Lack of proper legal and regulatory
frameworks, absence of educated market professionals, corporate malpractice, and scarcity of
foreign and institutional investors were identified as the main reasons. Legal and regulatory
weaknesses were identified as the critical hindrance to the market's potential growth. Finally,
the author suggested that effective regulation of the securities market should be ensured to
provide investor protection which will accelerate the growth of the market.
Conclusions
In conclusion it can be said that the selected article provides a clear picture of the
insignificant growth of the Bangladesh Securities market over the years. A detailed literature
review and a well defined research methodology would have added more depth and
understanding to the article but none the less, the article succeeds in its aim to educate the
reader. Since the article was published in 2005 and only discussed the growth of the market
till 2002, further research can be done to evaluate the growth of the market from the years
2003 to present, which may help to bring about further reforms for the betterment of the
Bangladesh securities market.
Reference
Solaiman. S. M. (2005). Securities market in Bangladesh: A critical appraisal of its growth
since its inception in 1954. Savings and Development, 29 (2), 169-198.