The need for a ‘Well Functioning and Competitive Market’- series Part I

finance

Finance emerged as a separate discipline from its mother discipline economic only in the 1950s and 1960s. Now, Finance is not only the basic lingua franca of business; it is also the lifeblood of the economy, business and household. Finance, as a specialisation, is so special and important because of its ability, structure and detail in understanding and making good decisions.

Finance, unlike accounting, is focused on the future and it is almost the only subject which is both a way of thinking and provides a set of tools for practical decision making. Finance, being forward-looking, requires some assumptions about human behavior like its mother discipline ‘Economics’.

A ‘well functioning and competitive market’ is one of the most important assumptions. A well functioning and competitive market is a less strict version of the famous “Efficient Market Hypothesis”.

The financial markets perform much the same function as the markets for other goods and services. They bring large numbers of buyers and sellers together, where people who need money to implement their great ideas will meet people who have money to save.

It aids in the mobilisation of savings and their channelization into more productive uses. The financial market facilitates price discovery, provides liquidity, reduce transaction costs and encourages competition and improves efficiency generally. Finance, as a specialization, is totally dependent on the price discovery aspect.

By Dr. Srikanth Parthasarathy
Associate Professor, Rajalakshmi School of Business, Chennai
Email: srikanth@rsb.edu.in

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  1. Well functioning and competitive market is very important to exist in the economy as to compare performance of two organizations in terms ROI, Shareholder wealth, growth over the year, MOS etc.

    Financial as a specialization is good combination with marketing and sales specialization.

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