Why is it important for a corporation to maintain the confidence of the stockholder?

Essay by agakutynaB+, October 2005

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Retaining the confidence of the stockholders is important in the effect that the market

value of the stock has on the corporation. Stock and the value of the corporate stock

does not necessarily provide the corporation with income. It provides the corporation

with capital. In turn, Capital becomes cash and collateral. The better the market value

of the stock, because of high stockholder cofidence, the more a corporation is able to

barter and trade in the world market.

Its like using your home for collateral on a business loan, the better the market value

of your house, the better terms of the loan. The more a corporations stock is worth, the

better the terms of doing business.

I think that the stockholders are much more savy that many years ago. With the internet

and financial reporting, they have so much more information at their disposal to make

decisions. The problems become with the reporting and information isn't viable (Enron).

I worked in investment banking for many years and saw how IB sold research to

companies to gain IB deals. In getting exposure for research, they were more visible

which attracted more shareholders and transactions.

I think advertising and media coverage are huge in gaining exposure, building interest in

products which leads to purchases. We don't realize how much marketing we receive in

our every day life from driving to work, listening to the radio and watching tv. We are

unindated with advertising. Sometimes it's the catchy tune or funny commerical that

catches are attention which leads to research and a purchase.

Actually, we have more people in the market (day traders) that are looking to make the quick

buck so corporate confidence has nothing to do with the reasons they buy and sell. I

think there are some sophisticated investors...