Multiplying financing choices through capital markets
Considerable evidence shows that countries with the most developed financial sectors and capital markets enjoy the strongest economic growth over the long run. The non-financial sector, small and medium sized entities can access a wider availability of more innovative and lower cost finance to aid their growth, while larger companies profit from an overall reduction in the cost of capital and a wider range of financial products. These economical agents in search of alternatives for financing their projects demand the greatest level of flexibility regarding the use of the financing instruments available and this flexibility can determine the success or failure of such a project. Capital markets also facilitate the efficient allocation of savings to where it is most productive. They allow large numbers of investors to reduce their financial risks through diversification. By spreading risk widely, they also cushion the economy against economic and financial shocks.
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- Wendy Carlin & Colin Mayer, 1999.
"Finance, Investment and Growth,"
OFRC Working Papers Series
1999fe09, Oxford Financial Research Centre.
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