ABSTRACT
Firstly, the stock market offers guidance to the management of listed ^companies; stock prices provide information on the current cost of capital, which is important in determining the appropriate capital magnitude and structure of companies. Secondly, the stock market provides the direction of investment for investors; stock prices are the signals of capital demand as evaluated by the market. Thirdly, the stock market is accessible to a vast number of investors, many of whom invest only minuscule amounts of capital that are then aggregated into a mass quantity for the companies by the market (Baumol 1965). Next, because many investors move their investments between companies regularly and wish to be able to withdraw their funds at will, the stock market makes it possible for the long-term capital demand to be financed by a sequence of short-term capital supply. Finally, the shareholders act as supervisors who monitor company performance.
