Security markets refer to any type of financial investment at the stock market. A security market encompasses; equity markets, bond markets, and derivatives markets. Only a few companies in East Africa are enlisted at the stock exchange due to the technicalities of listing companies and the disadvantages that comes with it. Enlisting a company at the securities exchange market has advantage and disadvantages. The following are some of the advantages and disadvantages of enlisting a company at the securities exchange market;
Advantages of Enlisting a Company at the Securities Exchange Market
(a) Free Coverage and Publicity;
Enlisting a company at the securities exchange market gives a company free coverage and publicity. Every day in our news channels we get to know which companies are gaining or loosing at the stock exchange market. This makes a company to be known to new potential customers and give confidence with the existing customers thus translating to more business for them without having to pay for advertisement. Since advertisement is very expensive, it saves a company a lot of finances which could have otherwise be spent on advertisement.
(b) More Access to Capital;
When a company gets enlisted at the stock exchange market, more capital is acquired from the initial public offer (IPO) or subsequent issues. This additional capital can be used by the company to expand the business, marketing, research and development, advertisement and many more. Instead of companies borrowing money from the bank and other financial institutions which is more expensive, listing the company at the stock exchange market solves this problem.
(c) Helps Companies to do Business Easily;
It is easy for companies which are listed ...
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...ld want to enlist their companies at the stock exchange market in East Africa because most of the companies are not very serious to keep up to date financial records especially when they start their businesses. Additionally, some companies hire cheap and incompetent accountants to keep their records when they start their business as the money needed to pay qualified accountants is not available at that time.
(e) Size of the Company and Status of the Shares
There is a set requirement of the minimum asset size and minimum paid up share capital for companies seeking to be enlisted at the stock exchange markets in East Africa. Some of the companies in East Africa do not meet this requirement posing a barrier for them to be enlisted at the stock exchange market. The shares must freely transferrable and there should be no restrictions in the buying and selling of shares.
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