Mention the importance of stock exchange in the modern industrial organisation
Answers
Role of Stock Exchanges are varied and highly important in the development of economy of a country. They measure and control the growth of a country.
Stock markets are the places, where exactly you do your business. Your stock trading transactions are executed at the stock exchanges through your broker, unless you have a membership with that exchange, which enable you to trade directly.
Stock exchange apart from being hub of primary and secondary market, they have very important role to play in the economy of the country. Some of them are listed below.
Raising capital for businesses
Exchanges help companies to capitalize by selling shares to the investing public.
Mobilizing savings for investment
They help public to mobilize their savings to invest in high yielding economic sectors, which results in higher yield, both to the individual and to the national economy.
Facilitating company growth
They help companies to expand and grow by acquisition or fusion.
Profit sharing
They help both casual and professional stock investors, to get their share in the wealth of profitable businesses.
Corporate governance
Stock exchanges impose stringent rules to get listed in them. So listed public companies have better management records than privately held companies.
Creating investment opportunities for small investors
Small investors can also participate in the growth of large companies, by buying a small number of shares.
Government capital raising for development projects
They help government to rise fund for developmental activities through the issue of bonds. An investor who buys them will be lending money to the government, which is more secure, and sometimes enjoys tax benefits also.
Barometer of the economy
They maintain the stock indexes which are the indicators of the general trend in the economy.They also regulate the stock price fluctuations.