Stock markets in transition economies

Well-developed stock markets provide many benefits (see Levine 1997 for a survey). They enhance economic performance by enabling growing companies to raise capital at lower costs. Because these companies do not have to rely as much on internal financing, they are able to grow faster. Stock markets also have advantages over other sources of financing. Companies in countries with developed equity markets are less dependent on bank financing, which can reduce the risk of a credit crunch. Equity markets also allow companies to rely more on equity and less on debt, creating a less risky financial structure in the event of an economic downturn.