The Warsaw Stock Exchange is one of the most important achievements of Polish transformation. Why then does the slogan “innovative economy” stir the imaginations of policy makers and the media, while the words “capital market” fail to elicit the same reaction? The answer to this question, among others, will be sought by the experts from WiseEuropa in the latest publication ‘Gust and calm. How the stock market drives the Polish economy?’
Overcoming the apathy that for five years has prevailed on the Warsaw Stock Exchange (GPW) will require all stakeholders to take decisive action. Their success rate will determine whether Polish entrepreneurs will have a chance of the competitive financial market in the future. Many financial institutions, each with a different function in the financial system and a slightly different set of advantages and disadvantages, seek to become an intermediary between households and companies. Although the purpose of this paper is not an exhaustive analysis of the modern financial market in its full complexity, it aims to present the reader with well-reasoned arguments for the fact that strong capital market is a sine qua non condition for the long-term economic success of any large or medium-sized country.
Even though the benefits of the capital market are numerous and unfortunately still not quite understood and appreciated by policy makers, the most important for the economy are the three of them that present the most difficulties for the banks:
- Firstly, the capital market is a unique source of venture capital that is quintessential for the growth of companies’ market power. This mainly applies to the most innovative projects that profit considerably from non-banking channels of financing.
- Secondly, it enables the most productive companies to rapidly enlarge their scale of operations and the money from the stock market allows them to expand on the market on a much greater scale then they could achieve by the accumulation of profit and taking a loan secured by their assets. This entails a whole range of macroeconomic benefits: lower prices of industrial production and services due to the economies of scale, easier funding of research and development, increase in market power of domestic brands and facilitating the development of domestic companies in global markets.
- Thirdly, the discipline characteristic of the stock exchange that is linked to transparency, respect for the corporate governance rules, value orientation and the processes of mergers and acquisitions significantly improves the allocation of resources in the economy. Zombie companies are a phenomenon unique to the economies where a bank loan prevails – capital market combines a positive attitude to risk with a fast and merciless action against less promising ventures.
The paper ‘A gust and calm’ inaugurates a much more ambitious project – Capital Market 25+. During the course of this project we will answer the question of the validity of stock exchange in Poland, illustrating the theoretical arguments with practical examples showing the beneficial effect of capital market on development and competitiveness of the Polish economy. The paper was published under the WiseEuropa Program of Public Policies and Governance.
In the fall 2016 we plan to publish a broader report showing the most important challenges of the Polish capital market. It will investigate the achievements of 25 years of the GPW existence compared to other world stock exchanges. It will be used for in-depth analysis of the new and the old weak points of GPW as well as their roots. Finally, based on the opinions of experts and institutions involved in the daily functioning of the capital market in Poland, the report will propose a range of recommendations of concrete, realistic solutions to implement so as to allow us overcome the deadlock.
Authors of the paper: Maciej Bitner, Maciej Bukowski, Urszula Siedlecka
