Corporate Adv. Accounting

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Week 1: Listing on Stock Exchange Advantages

  • Access to Investors

The opportunity to tap public markets for funds for companies with large current and future investments and high growth cannot be ignored (Wood, 2007). The company might need funds for expanding its operations in future. Hence, by listing on stock exchange, the company can raise funds at lower cost without having much difficulty as all kinds of investors seek stock exchange for investments (Wood, 2007). This is the main advantage as listing can enlarge the number of investors to whom the shares can be sold  (Wood, 2007).  

  • Publicity

A good company can attract attention by listing on the stock exchange. It gives a free publicity due to daily quotations  (Wood, 2007). It also raises the marketability of the company by making its value higher  (Wood, 2007). 

  • Liquidity

Shares of a private company can be traded on the National Stock Exchange (NSE) with minimal costs  (Wood, 2007). It is equity funds raising source hence it reflects that the company is preferring staying less leveraged. Raising money from diverse investors can reduce the liquidity while making the companies less leveraged  (Wood, 2007). 

  • Underwriting Costs

Underwriting costs arising to listed companies is often less for their initial public offerings (IPOs) as compared to the companies that are not listed on the stock exchange  (Wood, 2007). 

  • Objective Assessment

NSE quotes the current prices of the bonds based on the prices at which the securities change hands so that investors can benefit from the objective assessment of the current stock price  (Wood, 2007). It also provides a much higher collateral value for bank credits in future. 

  • Other Benefits

Other benefits include;

  • Provision of tax relief
  • Image enhancement of company
  • Full disclosure of information
  • Efficient allocation of capital
  • Enabling capital flow to priority areas
  • Provide proper control and supervision of trading of securities
  • Impart liquidity to securities 

Source: (Siddaiah, 2010)

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