Demystification of stock markets: The economic and social benefits? The case of Thailand

This paper examines two functions of the stock market- a source of investment finance to businesses and a source of supplementary income to individuals concentrating on equity pension funds. The main finding is that the long-standing premise about the role of the stock market as of the orthodox economists seems untrue for Thailand. The evidence presented suggests that the stock market provides at most about 10% of gross fixed capital formation and 15% of long-term capital expenditure of companies. In fact, and reinforcing findings in the literature, companies appear to rely much more on the internal source (retained earnings). The findings do point to the stock market having a greater role in investment financing in the post-financial crisis period, but this is still a limited role. Second, the literature reviews undermine the efficient and rational market assumed by neoclassical economists. Therefore, involving pension funds with equity comes with conditions on sufficient knowledge and disciplines to get updated about the market so that the right type of funds is selected at the right time.