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What Contributes to Financial Market Growth?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 06 September 2016
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In order to properly analyze the various factors that contribute to financial market growth, it is necessary to understand the meaning of the term financial market. Financial market is a general or broad term that is used in reference to a place where assets are traded by various entities, individuals and their intermediaries. Some common characteristics of such places is the fact that they are usually well-defined and guided by a rigid set of regulations that spell out the meaning of various situations and also specify the expected conduct of the various parties to the trades that go on in these places. Examples of such places include stock markets, and the factors that contribute to financial market growth include the development of strict guidelines and the adherence to these guidelines by the various participants as well various micro and macroeconomic factors flowing from the general economy.

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An important factor that contributes to financial market growth is structure, something that involves the development of laws and various regulations to guide the manner in which the activities in such places are regulated. The necessity for this lies in the fact that such regulations will help keep the propensity for unruly behavior and other undesirable actions of people in check, translating to a better organized financial market. This must include the specification of how participants must conduct themselves at all times and engage in their various trades as well as the development of criteria for those who wish to be listed on such markets as a means for screening these hopefuls for their eligibility. As important as it is to develop such laws, it is also necessary to develop a system of greater cohesion among the various financial markets in the world with the intention of reducing any unnecessary disparities. To this end, while the various markets might have their own unique regulations, certain general laws must apply as a means of leading to greater financial market growth.

Other factors that contribute to financial market growth include the growth of the general economy, since anything that affects the economy in a negative manner will also be reflected in the financial market as a form of chain reaction. The companies that have their assets traded on the financial market will definitely react to the macroeconomic factors in the economy, in addition to the microeconomic ones. When such companies fail, this might have a ripple effect on the financial market as it tries to absorb the aftershock caused by the implosion of these companies.

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