Advantages of Stock Exchange
Advantages of stock exchange are generally discussed from the broad anglesas below:
A. Advantages to Investors:
1. Assurance of liquidity:
Stock exchange deals only with listed or approved security. The investor can sell these securities as and when they like through the stock exchange. The investment in securities is, therefore, considered safe and in liquid form.
2. Encouragement to Investors:
Stock exchange provides a reasonable degree of safety to investors. They are
tempted to employ their surplus savings in liquid assets which are more profitable. The ready and continuity of market gives encouragement to investor. The securities listed on stock exchange are considered as reliable. The
Becurity for Loan:
investors can safely use as security for taking short term loans.
4. Better use of Capital:
The prices of listed shares are published daily in the newspapers they can transfer their capital from less profitable securities to more profitable shares through their brokers.
B.Advantages to Company:
Widens the Market of Securities:
The securities listed on stock exchange are in greater demand in the market. This helps in expansion or widening the market of securities.
Secure to Invest:
A listed company is considered more efficient and organized. The investors
el more secure to invest in these companies,
Increase in Goodwill:
A company whose shares are listed on stock exchange acquires credit worthiness. This increases its goodwill and helps in sale of securities
Better Performance:
The prices of shares listed on stock exchange are daily quoted in the
newspapers. The rise and fall in prices of the shares keep them well informed about the performance of the company. The managements of the companies therefore,
remain alert and try to improve the performance of the companies.
C. Advantages to Society:
9. Helps Industrialization:
Stock exchange encourages capital investment in various industries by making available the much needed capital
10. Better Utilization of Resources:
Stock exchange ensures better utilization of country’s resources by directing
the flow of investment from uneconomic to economic, inefficient to efficient
economic enterprises,
11. Saving Instrument:
Stock exchange promotes the saving habits of the people by providing safe instrument for investment.
12 Encouragement of efficient Units:
The shares of efficient productive units are sold at premium in the stock
This gives encouragement to efficient units to pay dividends to the shareholders
13. Increase in Capital Formation:
Capital and thus it helps in increasing the rate of capital formation in the country.
Criticism:
Stock exchange is criticized on the Dfa Ho ground of reckless speculation. If the wealthy persons or big institutions manipulate and artificially lower the prices of
shares, it results in instability in capital market and excessive losses to the investors.
