Factors Affecting Development Of An Emerging Capital Market

FACTORS AFFECTING DEVELOPMENT OF AN EMERGING CAPITAL MARKET

Submitted by ANIRUDH MEHROTRA Division A Roll No 50 Class B.B.A L.L.B of Symbiosis Law School, NOIDA Symbiosis International University, PUNE In OCTOBER, 2011 Under the guidance of DR.PUSHPA NEGI COURSE IN CHARGE, ACCOUNTS

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CERTIFICATE The project entitled ―FACTORSAFFECTING DEVELOPMENT OF AN EMERGING CAPITAL MARKET ―submitted to the Symbiosis Law School, NOIDA for ACCOUNTS as part of Internal assessment is based on my original work carried out under the guidance of Dr. PUSHPA NEGI from2011 to 2016. The research work has not been submitted elsewhere for award of any degree. The material borrowed from other sources and incorporated in the thesis has beenduly acknowledged. I understand that I myself could be held responsible and accountable for plagiarism, if any, detected later on. Signature of the candidate Date:21st October,2011

Electronic copy available at: http://ssrn.com/abstract=1989511

ACKNOWLEDGEMENT

It is a great pleasure for me to put on records my appreciation and gratitude towards DR. PUSHPA NEGI, course in charge for accountsfor his immense support and encouragement all through the preparation of this report and also for his valuable support and suggestions for the improvement and editing of this project report. Last but not the least, I would like to thank all the friends and others who directly or indirectly helped me in completing my project report. the library facilities and computer facilities of the Universityhave been indispensable.

Electronic copy available at: http://ssrn.com/abstract=1989511

ANALYSIS OF FACTORS AFFECTING THE DEVELOPMENT OF AN EMERGING CAPITAL MARKET:

INTRODUCTION
The role of long-term capital in the economic development of a nation cannot be over emphasized. Most economic managers recognize that a well organized capital market is crucial for mobilizing both domesticand international capital. In many developing countries, however, capital has been a major constraint in economic development. Dailami and Atkin (1990) describe the provision of funds to finance domestic capital formation as a key factor in the prospects for long-term economic growth in developing countries. The authors observe that the reality of a much reduced supply of foreign funds fromprevious sources, such as commercial banks, compels governments in many developing countries to pay increased attention to capital market development as a way of improving domestic resource mobilization, enhancing the supply of longterm capital and encouraging the efficient use of existing assets. They contend that the ongoing debt crisis is serving to focus attention on the importance of equity ratherthan debt, particularly in the financing of risky projects with long gestation periods. As Pardy (1992) observes, securities markets have an important role to play in financial liberalization and deepening. The author contends that apart from providing a means of diversifying risk for both capital raisers

and investors, securities markets could play other roles. For example, they are amechanism for capital allocation and corporate monitoring, and a means for government to exercise market-based rather than direct fiscal and monetary policies. Demirgùc-Kunt (1992) observes that in the poorest developing countries, firms rely mostly on internal resources and informal credit markets for financing. Commercial banks are the main financial institutions. The author contends that the loancontracts of commercial banks are generally short term, and formal direct credit markets for longterm debt or equity do not exist, thereby constraining both corporate and economic growth. Engberg (1975) recognizes the need for capital markets even for less-developed economies. He contends that capital markets can significantly raise the level of domestic savings and contribute to a more efficient...