The well functioning of the capital market is vital in the contemporary economy in order to be able to perform an efficient transfer of money resources from those who save towards those who need capital and those who succeed to offer it a higher capitalization; the capital market can significantly influence the quality …
Why do we need capital market?
Capital markets allow traders to buy and sell stocks and bonds, and enable businesses to raise financial capital to grow. Businesses also have reduced risk and expenses in acquiring financial capital because they have reliable markets where they can obtain funding. Capital markets will be there to help make it happen.
Why is the capital market important for economic growth?
The capital market is a highly specialized and organized financial market and indeed essential agent of economic growth and development because of its ability to facilitate and mobilize saving and investment.
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How does the stock market affect economic growth?
The functioning of the capital market affects liquidity, acquisition of information about firms, risk diversification, savings mobilization and corporate control (Anyanwu, 2003). Therefore, by altering the quality of these services, the functioning of stock markets can alter the rate of economic growth (Equakun, 2015).
How does the amount of capital investment affect the economy?
Increased consumer spending, increased international trade, and businesses that increase their investment in capital spending can all impact the level of production of goods and services in an economy. For example, as consumers buy more homes, home construction and contractors see increases in revenue.
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Why do capital markets promote participation in productive investments?
Capital markets promote PPPs, thereby encouraging participation of private sector in productive investments. The need to shift economic development from public to private sector to enhance economic productivity has become inevitable as resources continue to diminish.
