Financial Globalization! "liberalizing Saudi domestic financial market"

Financial globalization has added considerable value to countries as well as to corporations. Financial globalized markets both have enticed very sophisticated investors and increased liquidity in the markets. When there is a sufficient liquidity in a market, firms will have much more cash to invest or expand their businesses and this would strengthen the economy. With strengthening the economy, plenty of jobs will be created. With the increase of financial globalization, the improvement of domestic financial markets can be accelerated and when there is an accelerating development of a domestic financial market, capital flows can boost the economy.

Corporations and countries will benefit from this financial globalization when they attempt to hedge to offset their positions. Also, foreign participation in financial markets would enhance markets deepening, meaning, numerous shares will be bought and sold without any significant effect on the price of stocks. According to Investopedia, unlike thin market stocks, prices of deep market stocks become more stable and less volatile. https://www.investopedia.com/terms/d/deep-market.asp

Moreover, the local financial system will be integrated with international financial institutions and markets which would, perhaps, incentivize some countries to adopt some global accounting rules. Such action will make it much easier for firms to prepare their financial statements by utilizing specific accounting standards and policies. With global accounting standards that are going to be followed by corporations, there will be much more transparency. In other words, buying and selling decisions made by analysts will not be poor and inaccurate due to some misunderstanding of the way a firm's financial information recorded.

Financial institutions can make a substantial economic development. Several non-financial industries will have the ability to use the money "that is invested by financial corporations" to improve their productivity and/or invent new products. For example, many technology firms might have brilliant and innovative notions and they would hope to turn their ideas into a reality. However, given their lack of cash, they would need to attract those companies to invest in their firm. Therefore, having financial globalization would give those companies choices to raise capital whether from domestic or international venture capitalists.

I believe that there will be much more improvement of local market conditions if there are an enormous growth and escalation in foreign financial participation. Noticeably, we see Saudi open its doors even wider for foreign investors to come in and this would promote economic growth. We will have very sophisticated investors who will add more value to the companies by sharing their different experiences and knowledge. Also, another potential advantage of financial globalization is that Saudi financial system will greatly evolve. The government encouragement to foreign financial participation will increase the availability of funds for its citizens which will lead to greater competition.

I am absolutely certain that financial globalization poses some challenges and there will be some drawbacks associated with such phenomenon. The most prominent disadvantage is if there is any economic collapse (such as Dot-Com bubble, Wall Street crash in 2008, Asian financial crisis, etc.) known as global systematic risk, it will have a negative impact on the markets. However, I believe that the benefits our market will gain from financial globalization are exceedingly significant.

Ahmed Almuhr