How can a Stock Exchange be proven important in developing/developed economies regarding the expansion of firms? Are there some constraints of the Stock Exchange in the development of firms?


1 Answer 1


A stock exchange is essentially an organization for selling and buying shares and other securities. Through the stock exchange, businesses can reach a wider audience of shareholders or investors for financing.

A stock exchange is an important way for a business to get the money it needs to grow and spend it on capital goods. Through this platform of the stock exchange, it may even make it possible for businesses to grow by buying other businesses or merging with them. Because of the buying and selling of shares, these mergers and acquisitions will also help the company grow because, now that it is larger, it will have even more shareholders.

There are restrictions on how a stock exchange can be used where these benefits and uses exist.

First of all, a private limited company does not have that advantage and cannot use the stock exchange to expand because only public limited companies have the license to do so. There may also be other ways to get the money you need to grow, like getting help from the government, keeping profits, or borrowing money. Because there are already other ways to grow, stack exchange may not be as important.

However, the selling and buying of shares that take place solely on the stock exchange is a very advantageous method for expanding your shareholder base. For public limited companies, this is the most effective strategy for expansion.


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