The economy of a country depends on the fundamental mechanism of savings and investment of financial capital, leading to sustainable growth and development. The impetus for the economic activities as a result of the flow of funds is provided by entities that have surplus to other entities seeking funds. For...
Contract theory studies the mechanism by which economic entities undertake contractual obligations in the presence of information asymmetry – which can in turn lead to adverse selection and moral hazard. Information Asymmetry: This refers to the situation when one party to a transaction has superior information as compared to the...
The Random Walk Theory states that stock market’s price movement will not follow any specific pattern or trends and that past price movements cannot be used to predict future price movements. Stock prices fluctuate in a random and unpredictable path. The random walk theory is a school of thought that...
Methods Of Raising Equity Capital The primary market serves the purpose of raising funds in the form of new securities. The Primary Markets brings investors and users together resulting in transfer of funds from one to the other. Transfer of investible funds into industrial enterprises serves the three functions: namely,...
Sources For Raising Capital There are different sources for raising capital. Equity Capital represents ownership capital as equity holders represents as owners of the company and enjoy the rewards (dividends) and bear the risk (decrease in the market price of the shares) of ownership. From the corporate perspective, there is...
Primary Markets Primary market is a market for issue of new instruments or financial claims. This is the reason for Primary Markets to also be known as the “New Issues Markets”. The market facilitates generation of fresh capital by issuing securities such as equity shares, preference shares, debentures, Government Securities,...