First, the capital market requires enterprise standardization.
If an enterprise wants to raise funds in the capital market, it must make its own property rights system, governance structure and financial report meet the requirements of the capital market, and at the same time, it must disclose the major events of the enterprise to the market in time. This "standardization" is of great significance to the development of enterprises.
A reasonable governance structure itself will effectively supervise and restrain the management, and to some extent, it can prevent the company's operation from deviating from the interests of shareholders because of the abuse of power by the management. At the same time, timely information disclosure can make the market quickly evaluate the performance of management.
Second, the capital market urges management to improve management efficiency.
Investors can constantly put pressure on management through the capital market. When shareholders use the voting mechanism of the shareholders' meeting or the board of directors to select and supervise the management, they often give up the company's shares in the capital market to urge the management to improve management efficiency. Shareholders' "voting with their feet" increases the possibility of mergers and acquisitions in the capital market. Obviously, the takeover will lead to the unemployment of management and the decline of its reputation in the manager market.