What are the influences of financial managers on the economy of any country?

Financial Manager have influence on the country's economy upto certain limit, because economy depends on many factors. Financial managers can do their best by decreasing imports and increasing exports, increasing productions, which will help GDP and BOP also.

You need to understand the link between:

 

Finance Manager & the Company

The Company & the respective Industry

The Industry & the Economy

 

A Finance Manger is an important part of the team who is managing the company and company is a minor micro-economic part of the whole economy. If company is contributing towards the economy in a positive way, it will slightly improve it and vice versa.

 

 

 

Hello Team,

In the financial system funds flow from those who have surplus funds to those who have a shortage of funds, either by direct, market-based financing or by indirect, bank-based finance.

The financial system comprises all financial markets, instruments and institutions. Today I would like to address the issue of whether the design of the financial system matters for economic growth. My view is that the answer to this question is yes. According to cross-country comparisons, individual country studies as well as industry and firm level analyses, a positive link exists between the sophistication of the financial system and economic growth. While some gaps remain, I would say that the financial system is vitally linked to economic performance. Nevertheless, economists still hold conflicting views regarding the underlying mechanisms that explain the positive relation between the degree of development of the financial system and economic development.

Some economists just do not believe that the finance-growth relationship is important. For instance, Robert Lucas asserted in 1988 that economists badly over-stress the role of financial factors in economic growth. Moreover, Joan Robertson declared in 1952 that "where enterprise leads, finance follows". According to this view, economic development creates demands for particular types of financial arrangements, and the financial system responds automatically to these demands.

Other economists strongly believe in the importance of the financial system for economic growth. They address the issue of what the optimal financial system should look like. Overall, the notion seems to develop that the optimal financial system, in combination with a well-developed legal system, should incorporate elements of both direct, market and indirect, bank-based finance. A well-developed financial system should improve the efficiency of financing decisions, favoring a better allocation of resources and thereby economic growth.

Both market and bank-based financial systems have their own comparative advantages. For some industries at certain times of their development, market-based financing is advantageous. For example, financing through stock markets is optimal for industries where there are continuous technological advances and where there is little consensus on how firms should be managed. The stock market checks whether the manager's view of the firm's production is a sensible one. For other industries, bank-based financing is preferable. This holds in particular for industries which face strong information asymmetries. Financing through financial intermediaries is an effective solution to adverse selection and moral hazard problems that exist between lenders and borrowers. Banks in particular have developed expertise to distinguish between good and bad borrowers. Economies that have both well-developed banking sectors and capital markets thus have an advantage. Furthermore, in times of crisis in either system, the other system can perform the function of the famous spare wheel.

The financial system is also particularly important in reallocating capital and thus providing the basis for the continuous restructuring of the economy that is needed to support growth. In countries with a highly developed financial system, we observe that a greater share of investment is allocated to relatively fast growing sectors. When we look back more than one century ago, during the Industrial Revolution, we see that England's financial system did a better job in identifying and funding profitable ventures than other countries in the mid-1800s. This helped England enjoy comparatively greater economic success. The banker and former editor of "The Economist" Walter Bagehot expressed this in 1873 as follows. "In England, however, ...capital runs as surely and instantly where it is most wanted, and where there is most to be made of it, as water runs to find its level".

Nowadays, the lack of a well-developed stock market would be a particularly serious disadvantage for any economy. Equity is essential for the emergence and growth of innovative firms. Today's young innovative high-technology firms will be the main drivers of future structural change essential for maintaining a country's long-term growth potential. The contribution of financial markets in this area is a necessity for maintaining the competitiveness of an economy today given the strongly increased international competition, rapid technological progress and the increased role of innovation for growth performance.

In recent years, "new markets", for stocks of young and growing companies, have become a growing market segment in the euro area. Equity financing is particularly advantageous for these companies and their investors given the uncertainties of the economic return. As the term "shares" suggests, with equity financing you get your share of the outcome, whether it is positive or negative. Banks, on the other hand, may be reluctant to provide loans owing to the risk profile of these firms, and the greater exposure to a negative result in a loan contract.

Total market capitalization of the new markets in five euro area countries grew from EUR 7 billion at the beginning of 1998 to EUR 167 billion in December 2000. While some of this increase can be attributed to the overall rise in share prices during this period, it is important to note that the number of listed companies continued to increase in almost every month. The total number of companies listed on these new markets in the euro area increased from 63 at the beginning of January 1998 to 564 at the end of 2000. Developments over the last year have admittedly been dismal. However, it is the nature of new markets, given the uncertainties attached to future developments for the companies listed on these markets, to exhibit more volatility than established markets.

Regards,

 

Saiyid

agree with answers ..............>>>>>>>>>>>>>>>>>>>>>>>>>

full agree with all expert answers above

 

If the economy of the country is a wall, the role of the financial managers is like a brick in the wall. The financial managers propose / suggests policies on the basis of their experiences that helps in devising policies for the whole economy of the country. The segments of the economy that needs focus/have brighter prospects of growth may be pointed out by these financial managers which have long lasting impacts on economy. The export enhancing policies may be devised in the light of the suggestions of the financial managers.

The traditional corporate finance as the economy and global resources are tapped. In the world of any country his role are influence context of liberisation, deregulation and globalization. For example -: a. Financial analysis and planning b. Investment decesion c.Financing and capital structure decesions d.Management of financial resources e.Risk management: protecting assets.

Thanks for the invite I agree with the answers relevant experts