Stock Exchange Is Important for the Economy of a Country

Stock Exchange is Important for the Economy of a country.

Stock exchange is an important part of the economy of a country. The stock exchange plays a pivotal role in the growth of the industry and commerce of the country that eventually affects the economy of the country to a great extent. That is reason that the government, industry and even the National Banks of the country keep a close watch on the happenings of the stock exchange.

The stock exchange is importance for country lies from both the industry's point of view as well as the investor's point of view.

 Liquidity

The importance of the stock exchange lies in the fact that it allows investors to maintain liquidity for their investment. When a stock is listed on a major exchange, it allows any shareholder to sell his or her shares almost instantly. In most cases, immediate small sales are available at or very near to the quoted price per share.

Shares that are not listed through major exchanges are far less liquid, and could involve a great sacrifice or time or price to actually complete the sale. For this reason, investors pay less for stocks that can't be readily traded on a major stock exchange. With an initial public offering, liquidity is rarely a problem. Where liquidity is a problem, a market maker fills in the gaps between supply and demand.

 Legal Variable

In addition to providing liquidity, stock exchanges also serve as a form of monitoring agency. In order for a stock to be listed with a particular exchange, it must complete a series of requirements. Presence on any given exchange indicates that all qualifying criteria have been met. Ability to qualify for listing on a stock exchange can signal a certain amount of stability in a country. While it's certainly not a guarantee of the stock's future performance, it does lend the country some credibility.

Because listing requirements vary for each exchange, listing on certain stock exchanges can be an even greater indicator of the quality of the country.

 Supports Countries growth of Industry & Commerce

A rising stock exchange market is the sign of a developing industrial sector and a growing economy of the country.

Although the role of stock exchanges may seem peripheral at times, they serve an important function for companies considering going public. Their monitoring procedures and open marketplace ensure that qualifying companies get the most out of their offerings.

When we come to the question whether or not the establishment of stock exchange is important for Ethiopia, the answer is absolutely YES, but it is not the right time to establish a stock exchange in our country because:

 the available institutional infrastructures are not adequate;

 the government is not ready to establish a stock exchange;

 the policy environment is not conducive;

 the political and economic conditions of the country are not conducive and creating awareness in the society have to come first.

Government is not fully initiated to institutionalize the capital market in general and the stock exchange in particular like that of commodity exchange and the government's commitment to establish the stock exchange is not clear.

All the stake holders around the business of stock exchange business have to be more concerned to establish a stock exchange in our country at this time. Those stake holders are the

 Share companies managers,

 Shareholders,

 Respective government officials (the facilitating government organ for the establishment of the stock exchange).

Government (policy makers)

The government has to see again its attitude towards stock exchange and the respective government organ, National Bank of Ethiopia, have to do more on this area. As the Ethiopian economy is growing and likewise the share companies are increasing, the government has to give more attention to the establishment of stock exchange.

In parallel to the establishment of the stock exchange the facilitating organ (more or less the National Bank of Ethiopia) have to give attention to creating awareness as majority of the share holders have no knowledge of stock exchange.

Share companies

They have to do to pressurize the government to establish and institutionalize the stock exchange at this time as it is difficult to predict the time of the establishment of the stock exchange because the government is not fully committed to institutionalize the stock exchange.

They have to create awareness on the society using different communication Medias.

So, after the flowing issues are facilitated stock exchange is launched in Ethiopia because it helps a great for the development of the country in the following ways:

 It helps to easily sell and buy shares;

 It serve as an alternate source of finance;

 It helps to attract more domestic and foreign investors;

 Promote efficient financial system; allow de-concentration of ownership;

 Improve accounting and auditing standards;

 Provide effective tools for monetary and fiscal policy and

 Help privatization efforts by the government.

YES!! Government Intervention is required in Financial Sectors.

The role of the government in financial mark is a long-standing debate that has engaged economists around the world. There are certain recurrent themes in this debate.

The argument that government should whether or not intervene in financial institutions has been a debating issue for years. Government interventions thus necessarily need to focus on areas where market failures are most pronounced, such as in the health and finance sectors.

There exist government interventions that can potentially increase financial efficiency and/or equity. Some of the major elements of these interventions are by