Capital Market
2.2.1 Definition of Capital Market
Widoatmodjo (2012), defines "The capital market can be said to be an abstract market, where what
is traded is long-term funds, namely funds whose attachment in investment is more than one year".
Meanwhile, Tandelilin (2010) argues that the capital market is a meeting place for parties who
have excess funds with parties who need funds by trading securities.
Based on the above definition, it can be concluded that the capital market is a means of funding
and a means for investing activities by trading securities or long-term funds related to investments
of more than one year.
2.2.2 Capital Market Function
According to Sutrisno (2012), the capital market has several functions, including the following:
1. As a source of fund raising
The need for funds can be met through the capital market, many companies utilize the
capital market to find sources of funds or raise funds in accordance with the expected amount
without any limit on the amount of funds.
2. As a means of investment
Investment in the capital market is more flexible, because each investor can easily move
his funds from one company to another. Companies that sell securities to the capital market are
companies that have a good business reputation and credibility, so that the securities that are
bought will be sold on the stock exchange. Therefore, the capital market is one of the alternative
instruments for placing funds for investors other than in banking or other direct investments.
3. Income equalization
Companies that go public, are companies that provide opportunities for the wider
community to participate in owning the company. The company provides an opportunity for the
public to participate in enjoying the benefits of the company called dividends.
4. As an investment driver
To increase economic growth and advance development requires large investments. The
government will not be able to make its own investments without the help of the national and
foreign private sector. To encourage the private and foreign parties to invest either directly or
indirectly, the government must be able to create an investment climate that is conducive to them.
One of the healthy investment climate is the liquidity of the capital market. The better the capital
market, the more companies will enter the capital market and the more investors, both national and
foreign, are willing to invest their funds through the purchase of securities in the capital market.
2.2.1 Definition of Capital Market
Widoatmodjo (2012), defines "The capital market can be said to be an abstract market, where what
is traded is long-term funds, namely funds whose attachment in investment is more than one year".
Meanwhile, Tandelilin (2010) argues that the capital market is a meeting place for parties who
have excess funds with parties who need funds by trading securities.
Based on the above definition, it can be concluded that the capital market is a means of funding
and a means for investing activities by trading securities or long-term funds related to investments
of more than one year.
2.2.2 Capital Market Function
According to Sutrisno (2012), the capital market has several functions, including the following:
1. As a source of fund raising
The need for funds can be met through the capital market, many companies utilize the
capital market to find sources of funds or raise funds in accordance with the expected amount
without any limit on the amount of funds.
2. As a means of investment
Investment in the capital market is more flexible, because each investor can easily move
his funds from one company to another. Companies that sell securities to the capital market are
companies that have a good business reputation and credibility, so that the securities that are
bought will be sold on the stock exchange. Therefore, the capital market is one of the alternative
instruments for placing funds for investors other than in banking or other direct investments.
3. Income equalization
Companies that go public, are companies that provide opportunities for the wider
community to participate in owning the company. The company provides an opportunity for the
public to participate in enjoying the benefits of the company called dividends.
4. As an investment driver
To increase economic growth and advance development requires large investments. The
government will not be able to make its own investments without the help of the national and
foreign private sector. To encourage the private and foreign parties to invest either directly or
indirectly, the government must be able to create an investment climate that is conducive to them.
One of the healthy investment climate is the liquidity of the capital market. The better the capital
market, the more companies will enter the capital market and the more investors, both national and
foreign, are willing to invest their funds through the purchase of securities in the capital market.
