Stock exchanges, also known as financial markets, are places where several active products are traded. The best known are stocks and bonds. There are also a multitude of other products such as warrants, options, warrants. Let us discover through this guide the role of the stock exchange in the economy.
What is the dual role of the exchange?
The stock market plays a dual role as a place of financing for companies, states or communities when it comes to issuing shares or bonds. It is also an investment place for investors. It is with this in mind that the stock market is divided into two sub-markets, namely: the primary market and the secondary market. The primary market aims to organise meetings with companies wishing to finance their development and with capital holders.
It is possible to draw a parallel between the primary market and the new home market. As for the secondary market, this is the role of the second-hand market. In this collective management, this market, which is much more active than the primary market, is a place where billions of euros are traded every day on the Paris stock exchange.
What are the reasons for companies to go public?
There are several explanations for why companies go public. The exchange is an investment vehicle to increase funding opportunities. The initial public offering is the possibility of increasing payment facilities since the company can increase its capital and raise funds through this solution. The stock market represents an interesting alternative to traditional investment channels, that of banking networks.
Listing on the stock exchange is also an alternative to simplify the settlement of inheritance taxes. It facilitates control despite the liquidation of a number of assets. The stock market listing also makes it possible to increase the company’s reputation, to separate from certain partners, to increase employee profit-sharing on the company’s performance….
The role of the stock exchange in the economy
The stock exchange in the economy attracts international capital flows. This type of investment provides a very important favourable economic environment. Thanks to the stockbroker, investment opportunities can be created that are able to attract the interest of fund managers and all financial institutions.
To create investor confidence and attract international capital flows that are relevant to the development of a company’s economic activity, certain essential conditions must be met. These conditions include the search for efficient financial systems in host countries, the establishment of modern and sound infrastructures, the presence of sound financial institutions and liberal financial policies, particularly with regard to capital movements.