*The Zimbabwe Stock Exchange

Reasons why some companies list and others are reluctant to list

*The stock exchange

*What is a stock exchange

*A Stock Exchange is essentially a marketplace where people buy and sell financial instruments such as shares and bonds.

*It is a regulated marketplace

*Reasons why companies list on the stock exchange

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.

1.Enabling cheaper access to capital

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

2. Price discovery

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.

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

4. Separation of ownership and

management

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

Reasons why some companies are reluctant to list

*The Stock Exchange

*Reasons why they do not list

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

1.Risk that required funding will not be raised

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.

2. To disclose financial and business information

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.

3. Market Fluctuations

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.

Proudly presented by:

Bradely Mataruse

Raphael Jambaya

Samson Severa

Wisdom Hamadziripi

Daniel Tarume

Midlands State University

Information Systems

Fundamentals of Accounting 2A(HCS 213)