Advantages

 1. It facilitates the issue of securities to raise new finance, making a company less dependent upon retained earnings and   banks.

2. The wider share ownership which results will increase the likelihood of being able to make rights issues.

3. The transfer of shares becomes easier. Less of a commitment is necessary on the part of shareholders. For this reason the shares are likely to be perceived as a less risky investment and hence will have a higher value.

4. The greater marketability and hence lower risk attached to a market listing will lead to a lower cost of equity and also to a weighted average cost of capital.

5. A market-determine price means that shareholders will know the value of their investment at all times.

6. The share price can be used by management as an indicator of performance, particularly since the share price is forward looking, being based upon expectations, whilst other objectives measures are backward looking.

7. The shares of a quoted company can be used more readily as consideration in takeover bids.

8. The company may increase its standing by being quoted and it may obtain greater publicity.

9. Obtaining a quotation provides an entrepreneur with the opportunity to realize part of his holding in a company.

 Disadvantages

1. The cost of obtaining a quotation is high, particularly when a new issue of shares is made and the company is small. This is because substantial costs are fixed and hence are relatively greater for small companies. Also, the annual cost of maintaining the quotation may be high due to such things as increased disclosure, maintaining a larger share register, printing more annual reports, etc.

2. The increased disclosure requirements may be disliked by management.

3. The market-determined price and the greater accountability to shareholders that comes with its concerning the company’s performance may not be liked by management.

4. Control of a particular group of shareholders may be diluted by allowing a proportion of shares to be held by the public.

5. There will be a greater likelihood of being the subject of a takeover bid and it may be difficult to defend it with wide share ownership.

6. Management conditions, management employees give themselves more salaries due to prosperity obtained.