An analysis of raising finance through the stock market

Abstract

Purpose: This dissertation aims to analyse the local corporate market’s considerations when raising finance, in particular through the stock market. It also set out a comparison between raising finance through public channels and other traditional forms of finance. It also establishes whether tax and fiscal measures are a viable option to increase the attractiveness of the local stock market. Design: The methodology used involved the collection of qualitative data through the use of semi-structured interviews. These were carried out namely with financial advisors and stock brokers who are the main drivers of the stock market, tax advisors to set out the implications as well as the incentives given when listing on the stock exchange, local companies as well as professionals within the stock market industry. Findings: The results of this research highlighted that generally local companies are more inclined to debt financing due to the retainment of the ownership of their business. This is especially an important consideration, given that the majority of the local businesses are SMEs and family-owned. Moreover, local companies are still captured by a high percentage of bank financing due to the high costs involved in listing on the stock exchange. For this reason, it was found that although tax and fiscal incentives play an important role in the raising finance through the stock exchange decision, other non-financial measures such as the easing of regulation are more predominant options to incentivise more companies to take on the public route. Conclusion: This dissertation concluded that although there was an increased interest amongst local companies to raise finance on the local stock exchange, traditional sources of finance will still remain accommodating to the local corporate market. Value: In recent years it was illustrated that the local scenario is still dominated by bank financing. Thus, this dissertation provides a comprehensive study on how to increase the attractiveness of the local stock market while providing an alternative finance route for local businesses.