The Development of Equities Markets: 1964–85



Creating robust primary and secondary markets for stocks and bonds was the dominant objective of the reforms of 1964–7. The reasoning behind the reforms and the initial attempts at reform were outlined in Chapters 2 and 3. The economic crisis of 1963–4 saw firms become extremely illiquid. Policy makers felt that firms relied too heavily on (marginal) borrowing to finance any increase in productive activity. The fact that firms valued assets on a historical basis, as opposed to a market basis, combined with inflation to decapitalise them. This resulted in inadequate provisions for depreciation showing up as ‘illusory profits’.1 The small market for equities, comprised of both the stock exchanges and the almost non-existent ‘over-the-counter’ market (mercado de balcão), was seen as a barrier to the stronger capitalisation of domestic firms through stock issue. Further, the closed nature of firms and their reluctance to dilute control made the issue of common stock extremely rare, thus stunting the development of a primary issues market.2


Stock Market Capital Market Stock Issue Stock Exchange Mutual Fund 
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    Annibal V. Villela and Werner Baer (1980): 0 Setor Privado Nacional: Problemas e Pollticas para Seu Fortalecimento (Rio de Janeiro: IPEA), pp. 95–107.Google Scholar

Copyright information

© John H. Welch 1993

Authors and Affiliations

  1. 1.Federal Reserve Bank of DallasUSA

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