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The zimbabwe stock exchange

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the advantages and disadvantages of listing on the stock exchange

the advantages and disadvantages of listing on the stock exchange

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  • 1. *
  • 2. Reasons why some companies list and others are reluctant to list *
  • 3. * *A Stock Exchange is essentially a marketplace where people buy and sell financial instruments such as shares and bonds. *It is a regulated marketplace
  • 4. * 1. Enlarging and diversifying equity base 2. Enabling cheaper access to capital 3. Price discovery 4. Attracting and retaining better management and employees through liquid equity participation 5. Transparency 6. Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.
  • 5. 1.  One of the reasons for listing is the need for fresh, relatively low-cost capital. Thus a listed company may find it easier to obtain funding from more traditional sources due to its superior profile. This type of funding could even be obtained at a cheaper cost because of the company's higher profile as a listed company
  • 6. 2. This is an advantage for both the investors and the listed companies as their securities will have an acceptable “public” price which can be used in the valuation. Investors can value the shares or debentures that they hold which will help them to know the market value of their investment while the listed company will know its worth. If a “public” price did not exist, valuations can still be done but these will be quite subjective as information will be from sources that are not available to everyone.
  • 7. 3. Transparency All this information is publicly available via the exchanges’ or other websites and publications including the media. This will improve the transparency of a company as the public will know its inner workings. This transparency factor could help when the company is looking for new investors or partnerships. It could also improve the public image of the company and add value to its CSR (Corporate Social Responsibility) activities
  • 8. 4. A listed company can have a professional management team, particularly as its public image can make recruitment easier, which will enable its founders or owners to concentrate on other interests or investments and leave the daily running of the company in the hands of professionals
  • 9. Reasons why some companies are reluctant to list *
  • 10. * 1. Significant legal, accounting and marketing costs, many of which are on-going 2. Requirement to disclose financial and business information 3. Meaningful time, effort and attention required of senior management 4. Risk that required funding will not be raised 5. Your business may become vulnerable to market fluctuations, which are outside your control. 6. Loss of control and stronger agency problems due to new shareholders
  • 11. 1. Other concerns which are often mentioned by companies thinking of coming to the market are the actual costs of listing and on-going compliance. Listing costs mainly consist of: I. sponsor and professional fees; II. advertising and marketing expenses in connection with an offer for sale; III. initial fees payable to the authority; and IV. Annual fees payable to the exchange.
  • 12. 2. Public dissemination of information which may be useful to competitors, suppliers and customers. More importantly, especially for smaller companies, is the cost of complying with regulatory requirements can be very high. Some of the additional costs include the generation of financial reporting documents, audit fees, investor relation departments and accounting oversight committees.
  • 13. 3. The actions of the company's management also become increasingly scrutinized as investors constantly look for rising profits. This may lead management to perform somewhat questionable practices in order to boost earnings.
  • 14. Proudly presented by: Bradely Mataruse RaphaelJambaya Samson Severa Wisdom Hamadziripi DanielTarume Midlands State University Information Systems Fundamentals of Accounting 2A (HCS 213)