Role of stock exchange in economic development, Finance Basics

Role of Stock Exchange in Economic Development

The Roles of Stock Exchange in Economic Development are as follow:

1. Raising Capital for Businesses

The Stock Exchange offers companies along with the facility to increase capital for expansion by the selling shares to the investing public.

2. Mobilizing Savings for Investment

While people draw their invest and savings in shares, it leads to a more rational distribution of resources since funds that could have been consumed, or remained in idle deposits through banks are mobilized and redirected to promote industry and commerce.

3. Redistribution of Wealth

Through giving a wide spectrum of people a chance to buy shares and consequently become part-owners of profitable enterprises, the stock market facilitates to decrease large income inequalities because many people obtain a chance to share in the profits of business such were set up via other people.

4. Improving Corporate Governance

Through having a wide and varied scope of owners, companies commonly tend to develop on their management standards and efficiency in sequence to satisfy the demands of these shareholder. It is evident that usually, public companies tend to contain better management records rather than private companies.

5. Creates Investment Opportunities for Small investors

As opposed to other business such requires huge capital outlay, investing in shares is release to both the small and large investors since a person buys the number of shares they are able to afford. Consequently the Stock Exchange offers an extra source of income to small savers.

6. Government Raises Capital for Development Projects

The Government and even if local authorities same to municipalities may decide to borrow money in sequence to finance huge infrastructural projects as like sewerage and housing estates or water treatment works with selling another category of shares identified as Bonds.  These bonds can be increased through the Stock Exchange whereby members of the public buy them. While the Government or Municipal Council obtains this alternative source of funds, it no longer has required overtaxing the people in sequence to finance progress.

7. Barometer of the Economy

On the Stock Exchange, share prices increase and fall depending there largely, on market forces. Share prices tend to increase or stay stable while the economy companies and Barometer in commonly show symbols of stability. Consequently their movement of share prices can be an indicator of the usual trend in the economy.

Posted Date: 2/1/2013 12:48:16 AM | Location : United States







Related Discussions:- Role of stock exchange in economic development, Assignment Help, Ask Question on Role of stock exchange in economic development, Get Answer, Expert's Help, Role of stock exchange in economic development Discussions

Write discussion on Role of stock exchange in economic development
Your posts are moderated
Related Questions
If Metropolis Healthcare Systems have 1,150,000 in cash. How long will it take them to accumulate 2,000,000 in cash? Assume an interest rate of 5%..

Definition of 'Capital Budgeting': The process in which a business calculates whether projects such as building a new plant or investing in a long-term risk are worth pursuing

Management of company and Directors They will consequently be interest in as: a) In generating profits efficiency of the company b) The company's capability to generate

Illustrate in brief about the Investment  Process A  typical  investment  decision  undergoes  a  five  step  procedure which, in turn, forms the foundation of investment pr

Growth rate : The average of PC manufacturing industry growth rate was 22.24% for 2004, 20% for 2005, and 17.29% for 2006. It showed that the industry's growth rate has been declin

Contribution Margin The Average of the industry Contribution Margin (CM) was 15.40% for 2004, 14.39% for 2005, and 13.18% for 2006. The chart showed that Contribution Mar

Computation of Weights or Proportions In computation of the weights or proportions of different capital components, the following values might be used like as: Mar

"Managerial leadership considers that the focus of school leaders ought to be on functions, tasks and behaviours and if these functions are carried out competently the work of othe

Explain the Operations of Indian Stock Market. Meaning of Stock Exchange: Stock exchange means an organized market where securities issued by government organizations, compan

Weaknesses of WACC as Discounting Rate WACC/Overall cost of capital has the following problems like a discounting rate as:  It can simply be used as a discounting