In a market economy the stock exchange has a triple role, first to pool together society’s savings dispersed among individual savers; second to channel selectively these savings to companies with the best investment prospects, and third to encourage the efficient use of assets embodying past savings. Two interrelated mechanisms are involved. A primary market mechanism, whereby new issues of shares are made by companies wishing to raise funds, and a secondary market mechanism whereby trade in the existing shares of companies is carried out. A company whose equities are traded at a relatively low price will find it relatively expensive or impossible to raise new funds in the primary market. It may also be subject to the threat of a takeover in which a majority ownership stake in its equity is acquired by another company whose objective is to change policies to improve the stock price. Management teams may thus compete in a market for corporate control, and takeovers may then be interpreted as a central part of the stock market selection process.