By issuing stocks through the stock market, a large amount of funds flowed into the stock market and into the enterprises that issued stocks, which promoted the concentration of capital, improved the organic composition of enterprise capital and greatly accelerated the development of commodity economy. On the other hand, through the circulation of stocks, small amounts of funds are pooled and the concentration and accumulation of capital are accelerated.
Therefore, on the one hand, the stock market provides a basic place for the circulation and transfer of stocks, on the other hand, it can also stimulate people's desire to buy stocks and provide guarantee for the issuance of the primary stock market. At the same time, because the transaction price of the stock market can objectively reflect the relationship between supply and demand in the stock market, the stock market can also provide reference for the issuance of stocks in the primary market in terms of price and quantity. The function of the stock market reflects its nature. In a market economy society, stocks have the following four functions:
1. Accumulate capital
Listed companies raise capital for their companies by issuing shares in the stock market. Listed companies entrust their stocks to securities underwriters, who then issue them to investors in the stock market. With the issuance of stocks, capital flows into listed companies from investors.
II. Transfer of capital
The stock market provides a place for the circulation and transfer of stocks, which enables the issuance of stocks to continue. If there is no stock market, it is hard to imagine how stocks will circulate, which is determined by the basic nature of stocks. When an investor chooses bank savings or bonds, he doesn't have to worry about the liquidity of the money. Because in any case, as long as he reaches the agreed time limit, he can recover the interest and the principal at the agreed interest rate, especially the bank deposit. Even if he withdraws in advance, he can get a small amount of interest in addition to the principal. In short, there is no problem in withdrawing the investment and turning it into cash. But the stock is different. Once you buy the stock, you are called the shareholder of the enterprise. After that, you can neither ask the issuing enterprise to withdraw the stock nor ask the issuing enterprise to redeem it. If there is no place for the circulation and transfer of stocks, the investment in buying stocks will become a dead money, and even if the shareholders are in urgent need of cash, the stocks cannot be cashed. In this case, people will have worries about buying stocks, and it will be difficult to issue stocks. With the stock market, investors can transfer their shares in the stock market at any time, and cash them at a fair and reasonable price, so that dead money can be turned into living money.
iii. transforming capital
the stock market transforms non-capital monetary funds into production capital, which builds a bridge between stock buyers and sellers and provides the necessary conditions for the transformation of non-capital monetary funds into capital. This function of the stock market is of great significance to the addition of capital and the promotion of economic development of enterprises.
Fourth, give the stock a price
The stock itself has no value. Although the stock circulates in the market like a commodity, its price has nothing to do with the value of the capital it represents. The price of a stock only shows up after it enters the stock market. The price of a stock circulating in the market is different from its par value, which is only the basis for stock holders to participate in dividend distribution, not equal to the real capital value it represents, nor is it the basis of stock price. In the stock market, the stock price may be higher than its par value or lower than its par value. The circulating price of stocks in the stock market is determined by many factors, such as the expected return of stocks, the market interest rate and the relationship between supply and demand. But even so, if there is no stock market, no matter what the expected return and how much the market interest rate changes, it will not affect the stock price. Therefore, the stock market has the function of giving stock prices.