ROLE OF STOCK EXCHANGES

Corporate Governance:

Stock Exchanges have multiple roles in shaping the economy of a nation. Capital raising for business, mobilizing savings for investment purposes, facilitation of company growth, corporate governance and distribution of wealth are the essential roles played by most of the Stock Exchange. Generally, it is observed that companies improve their standard of management and efficiency, so as to satisfy the shareholders demands and also, to satisfy the rules imposed by the Government and the Public Stock Exchanges. Consequently, it appears that Public Companies have better records of management than their private counterparts. Numerous well-documented cases have cropped up in recent years whereby, it is alleged that considerable slide in the corporate governance on some public companies such as Enron, Pets.com, Sunbeam, Adelphia, Parmalat is observed. One reason attributed to these may also be the fact that, these companies are widely scrutinized by the media.

Capital Raising For Development:
 
At various levels, the government sometimes decides to borrow money, so as to finance some major or minor infrastructure projects such as water treatment or transport projects. This happens through the sale of securities known as bonds. These bonds are collected through the Stock Exchange wherein, the public system members buy them which helps in loaning the amount collected to the government. Such issuance of municipal bonds helps avoid, the need to tax the citizens for the finance of developmental projects.

Miscellaneous:

One of the major roles of stock markets is to give a chance to the public, to grow their funds in the way they like rather than depositing in banks, with a limited or small interest rate. This helps in more rational allocation of resources, since these funds which would have got exhausted or maintained idle, through deposits in financial institutions can be redirected for the promotion of business activity. It also helps benefit numerous economic sectors such as industry, commerce and agricultural industry thereby, resulting in a healthier economic growth and increasing levels of productivity. Besides these, the Stock Exchange also provides facility of raising capital for the expansion purposes, through public investment and the sale of shares. Also, stock Markets help in monitoring the general trends in the economy.