Every organization wants to expand its business. The resource that fuels expansion of any organization is capital. There are many ways to generate capital. Normally companies go public to meet their demands of huge capital. When a company goes public for the first time, then it is called Initial Public Offer (IPO). There is a lot of exercise that goes into allocation of shares among individual investors, promoters etc. In order for the stock to be traded, it has to be listed with a stock exchange. In case of India it is either Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). After it is listed, the stock price varies with the performance of Company. Financial results released by companies at regular intervals is a good indicator of performance of a company. Wall Street closely watches the balance sheets of the publicly traded companies because it is bothered about the heavy betting it takes on a companies stock. As a result companies become too conscious of Wall Street. Meeting the market expectations is good thing to cheer and a good way of repaying the investors who reposed their faith in the company. In some cases where companies give more importance to this goal, they hide the stock de-valuing factors. They fabricate the books and present a normal picture. This tampering with numbers will only give temporary relief to organization , but has a huge negative implication which will roll out eventually. Examples of Enron, America Insurance Group are good examples of this.
Is wall Street the Culprit for the mistakes committed by organizations?
3 comments:
hmmm....ur post makes me rethink abt it allover again....mmmm there's substance in it
nice article and a nice question...
we cant say that wall st. is the culprit.. we can say wall street is the main victim and because of that the remaining world is suffering as they take cues from this market
the main reason for this meltdown are the investment bank majors.
there was no tighter regulation of investment banks by US Securities and Exchange Commission;now they will be regulated by the Federal Reserve and will have tighter regulation.
but its sad to see the end of investment banks which were dream companies for all toppers in the top institutions across the world.
people were happy(especially rich people and banks which funded these investment banks) when they gave high returns and now they suffer when the risky investment collapse.
the real estate prices fell shockingly in US.
r u planning to buy a big villa in a posh colony viswanath???
ofcourse i want to buy a villa, but if i buy now, then i too will become a part of sub-prime crisis... ;)
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