What is involved in the development of the capital market?
In economics, capital concerns the sources that businesses grow. It usually takes the form of money that companies can spend on hiring more employees, buy more equipment and increase production. Businesses usually increase this capital from investors to sell shares and bonds on the capital markets. Governments will take a number of regulatory steps in the development of the capital market to build investors 'confidence through rules and laws in the field of transparency of investors' money. Shares are ownership shares in the company itself, which investors hope to sell at a higher price or use to collect payments from business called dividends. Bonds are loans of the company that is paid off by interest. Individuals buy stocks and bonds with the intention of making a profit from the money they invest in the company. This creates a situation where companies can raise more money for growth, and ainvestators can benefit from providing this money to these businesses.
Whenever individuals invest money in society, risk losing it. Stock values may drop, or companies may go bankrupt before they fly their bonds. These risks are present in any investment, but investors do not want to lose their money for fraud or corruption. The purpose of the development of capital market is to build investors' confidence that money will not be lost due to factors that are not of business or economic nature. Building investors's confidence is important because this increases the likelihood of investing, which can help businesses grow and greater economy to develop.
One of the main factors of the development of capital market is investor money protection laws. They may include those who regulate how the company assets are liquidated and divided among investors. Such laws can assure individuals who think about it on a particular market that its companies will not be unnecessarily notbo fraudulently declare bankruptcy. Such regulations do not prevent investors from losing money if the company fails but can enable them to recover their initial investment, helping to build the legitimacy of the capital market.
Another way that governments can support the development of capital markets are laws regarding business transparency. In order to do informed investment decisions, individuals who are trying to buy shares or bonds of the company must have reliable information about their finances. This allows them to accurately assess the risk of investment. If investors can believe that the information that companies publish on a particular market are accurate, then it is more likely to invest in this market.