The Role of Financial Intermediaries in Equity Markets

Ekonomika, 2024

In the financial system of the Republic of Serbia, the capital market does not play a significant role-it practically does not perform one of its basic functions-the transfer of resources from surplus to deficit sectors. The Belgrade Stock Exchange, as the only organizer of the Regulated Market and MTP in the country, played a one-time role of transfer and concentration of ownership in the first years of privatization. After that, and considering the significant costs and reporting obligations of listed companies, the delisting process followed-only companies that had to do so by force of law remained on the stock exchange. Also, although the last two decades have been marked by significant regulatory improvements (from shareholder protection, takeover obligations, transparency of public companies' operations), the trading platform is aligned with the practice of regional markets, new market participants are included in the market game (such as investment funds), the domestic capital market has all features of underdeveloped markets. The aim of this paper is to establish how the market participants themselves perceive the factors of capital market development. For this purpose, research was conducted by sending a Google questionnaire to the addresses of all members of the Belgrade Stock Exchange and all registered investment fund management companies. Participants in the research declared themselves on twelve statements that were formulated in such a way as to establish a connection between certain factors and the development of the capital market. The results of earlier research, which represent the basis for the formulation of said claims, are listed in this paper. In addition to the results of earlier research, the formulation of the mentioned claims was also conditioned by the appreciation of the specifics of the domestic capital market, as well as the author's knowledge based on many years of experience in dealing with securities. A five-point Likert scale of attitudes was established for each statement (from 1 to 5), which refer to the determination of respondents regarding the circumstances of the development of the capital market. Respondents were offered a choice between five answers

2019

The purpose of this paper is to describe the position of mediators in the Croatian stock market as well as to point out the need of repositioning due to essential changes caused by the EU acceptance and new development possibilities. Different social, political and economic changes and developments in Croatia reflected on the capital market, its institutions, players, dynamics, size and strengths. Through the Zagreb Stock Exchange, and the Varaždin Equity Market which gradually turned in to the Varaždin Stock Exchange, and later became a part of the Zagreb Stock Exchange, all positive and negative field lines are reflected as well as their results. The paper starts with describing the position and function of the capital market as an integral part of the overall financial market. Many players saw the developed capital market as a chance for a rapid progress of the Croatian economy, as well as catching up to more developed democratic economies. The following part describes the role o...

The chapter analyses Serbian financial markets: capital market, money market and foreign exchange market. Market fall of 26% was determined during 2011 compared to the record breaking 2008, despite a visible recovery after 2009 and 2010. Foreign exchange market has dominated with the average 62% of market share, money (repo) market is significantly less (35%), while the capital share is minor (3%). Government debt securities (2/3) are the dominant segment on the capital market in Serbia. Shares make the rest of this market (1/3), because there weren't any corporate debt securities. Turnover decreased for over 70 percent for both BELEX indices, while the whole capital market has notably recovered thanks to an extensive borrowing of the state. However, the turnover on this market was 10 percent less than the GDP. Stock market capitalization has fallen. Systematic risk and market risk significantly rise, measured by the CAPM model. Money market included only the central bank repo securities (repo market). This market dropped on less than 1/3 of the turnover shortly before the economic crisis. Forex market completely recovered after a stumbling fall in the period 2009-2010. The final part of this chapter shows a new regulatory framework (Law of Capital Market, 2011). Results of the analysis are summarized in the conclusion and it can be estimated that there are great needs for the enhancement of these markets, but the possibilities for such a development depend mostly on foreign investors.

Classical financial theory ignores the existence of financial intermediaries. In neoclassical micro-economics, the capital market brings together agents with financing capacity – investors – and agents with financing needs – companies. Thanks to the private information they possess, the latter on the productive potential of the company, the former on the marginal productivity of their investment, the trade can take place. I propose first of all to review the discourse that legitimises financial intermediaries through economic theory. This naturalised vision of finance could not be further removed from reality: the financial security only exists because of the presence of systems and organisations that give it its attributes (liquidity, status), take care of its distribution (via market institutions, distributors, advisors) and ensure its price history can be traced. The angle adopted is a resolutely micro-economic one, starting with the initial theory of financial intermediation put forward by Gurley and Shaw (1956). In a second part, I will present some socio-politically-inspired approaches that highlight the appearance of financial intermediaries through the possibility of legitimising the capture of economic rents. This aspect, which appears in many recent works focusing on the financialisation of the economy, emphasises the link between financial institutions and certain forms of political domination. Finally, the third part will present some of my own work in the field of social studies of finance which are based on observational field research and which explore the socioeconomic nature of financial intermediation. JEL: G2 Classical financial theory ignores the existence of financial intermediaries. In neoclassical micro-economics, the capital market brings together agents with financing capacity – investors – and agents with financing needs – companies. Thanks to the private information they possess, the latter on the productive potential of the company, the former on the marginal productivity of their investment, the trade can take place. In the Asset Pricing Theory approach, only financial securities are considered, these being defined through two statistical dimensions: their risk and their return. The resulting optimum portfolio depends on these parameters as well as on the investor's degree of risk aversion. Once again, there is no need to seek the services of an intermediary. Naturally, in macroeconomics , we find the same absence. Hicks (1974) contrasts the intermediated economy with the market economy where investors purchase their securities directly from issuers. The bank is distinguished by its inevitable presence in the transformation of deposits into loans. This naturalised vision of finance could not be further removed from reality: the financial security only exists because of the presence of systems and organisations that give it its attributes (liquidity, status), take care of its distribution (via market institutions, distributors, advisors) and ensure its price history can be traced. For financial institutions existed before securities (Carruthers, Stinchcombe, 1999) and it is these institutions and not securities themselves that have driven the development of finance. Without them, without their reputation, without the trust the community places in them, securities

Journal of Contemporary Issues in Business and Government, 2021

This study tries to examine the role of financial intermediaries in capital market. And also looks over the impact of financial intermediaries on capital market development. Financial intermediaries exist for the profits within the Financial system. Capital market is the place where the savings and the investment have been done between the suppliers and the people who need the capital. The financial intermediaries arise to reduce the information of risk management and the mobilisation of the savings. These intermediaries assist the investors to grow their money by the way of investments. This paper comes to the opinion that financial intermediaries play a major part in the economy and helps the investors easily make investment in the capital market.

Ekonomika, 2016

Capital market represents the most important and influential segment in the economic policy and practice, with which successful and long-lasting functioning of the complete economical system is realized. Namely, this market offers many possibilities for mobilizing necessary financial resources for financing current and developing work of business entities, and on the other hand, it gives wide choice to the investors for investing free financial resources. Namely, the establishment of a successful stock market in a developing economy can be a major source of economic growth if it provides development finance by channeling domestic savings and attracting foreign investment. However, this objective is not always met, particularly in very small markets where there are barriers to efficient market operations. In that context, the main objective of this research is to analyze the current status of the Macedonian Capital Market (Macedonian Stock Exchange-MSE), the extent of knowledge about Macedonian Stock Exchange as a most important part of the capital market and the sources that promote knowledge about capital market (stock market) activities, also to identify the variables affect the investor's opinion to invest in MSE. In R. Macedonia, the capital market is not developed enough yet, that has a negative influence on business entities financing, and all that affects economic growth and development. Namely, the research carried out in this study has shown that public awareness for the existence and effective functioning of the capital market in the Republic of Macedonia is on a very low level. Altogether, it is observed that there is a long way to go for stock market operations in the Republic of Macedonia but need to get a powerful startup with a very dedicated, investment awareness campaign. The best model of development for Macedonian Stock Exchange is based on the active participation of stock exchange, government and companies inviting investors and creating confidence for secured investment.

This paper analyses the Serbian capital market. Its main characteristic is that it is a very narrow and depth lacking market. For analysis we used data from the Belgrade Stock Exchange (BSE), Republic of Serbia Securities Commission (SEC), and National Bank of Serbia (NBS). The crisis has negatively influenced on the capital market in Serbia. Due to this fact, the analysis was done by dividing into two sub-periods: before the crisis (2006-2008), and during the crisis (2009-2011). Results showed that turnover decreased for over 70% for both BELEX indices, while the whole capital market has notably recovered thanks to an extensive borrowing of the state. Stock market capitalization has fallen. Results of analysis showed that government debt securities dominate after the crisis on the capital market (93% in 2011), while other shares from privatization make a negligible part of the market (equity market dropped for over 10 times from 2006 to 2010). We concluded that the privatization in Serbia significantly influenced on the features and volatility of the capital market in Serbia.

Theoretical and Applied Economics, 2011

The need for capital market in a market economy can not be questioned. The capital market belongs to nowadays reality, its main objectives are related to capital mobility, based on the principle of economic efficiency and minimizing risk associated with investment and ...

Bankarstvo, 2016

Frontier markets, such as Serbia, which are at the early stages of development, are characterized by very low level of solvency, absence of corporate management rules and reports to the public, insufficiently developed regulations, as well as significant participation of foreign portfolio investors in the exchange. Those are usually foreign investment funds specialized in risky investments at such markets; they apply the principle of geographic portfolio diversification in their investment policy. At the Belgrade Stock Exchange, foreign investors have been present at the stock market since 2002 and they participated in high volumes in stock buying during the stock market growth in the period from 2002 to 2007, whereas during the crisis at the Serbian capital market from 2008 to 2010 there was a significant increase in foreign investors' participation on the selling side and a withdrawal from the Belgrade Stock Exchange. Such behavior of foreign investors was initially prompted by local factors, but was intensified by the global financial crisis and will be analyzed in this paper.

2017

DOI: 10.21276/sjebm.2017.4.10.10 Abstract: Investment Corporation of Bangladesh (ICB) is one of the renowned investment banks in Bangladesh. As an investment bank, ICB has been performing its merchandising and financial assistance operations since its inception. From directly participating in equity to superintending the issue of debentures, bonds, mutual funds, etc., all are within the activities of the ICB. That is why the principal objective of the study is to examine the role of ICB in the capital market development and to explore its opportunities and challenges. The researchers have used the documents of ICB and the capital market of Bangladesh to evaluate the role of ICB in capital market development. Both qualitative and quantitative interpretations were needed for the present study. The present study has exclusively used those methods by compiling the data of very critical and eventful ten years (2001-2011) of DSE, CSE, ICB and other related financial organizations. After c...