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Why are secondary market transactions of importance to corporations?

Why are secondary market transactions of importance to corporations?

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Answer #1

The corporations do not generate cash flows or benefit from secondary market transactions if they have not themselves initiated those transactions such as share repurchases or buying back the bonds. The mere existence of secondary markets which ensure that investors can sell/buy the securities again makes them comfortable enough. This also helps them to invest in their primary market offerings. Likewise if investors are assured of an organized, convenient market in which to alter their portfolio of securities, they would be willing to invest easily.

The secondary market also acts as a performance benchmark for management and the future prospects for the firm. These secondary market valuations also help firms understand the price range for their primary market offerings

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