What are the two critically important functions for corporate financing performed by stock exchanges?

First, by providing a secondhand market for stocks, stock exchanges make individual investment in a company much less risky. Investors know that if they need money, they can always sell their stocks to other investors or to stock market specialists at the current market price. This reduction in risk makes it far easier for corporations to issue new stocks.

Second, the stock market determines the current price of the company's stocks. That, in turn, determines whether it will be difficult or easy for a corporation to raise money by selling new stocks.