Why companies want to please shareholders
Professional investors buy shares in the hope of benefiting from a rising stream of income over the long term.
When profits are distributed to the shareholders the payments are known as "dividends". The capital value of a share - its quoted price - moves mostly in line with expectations of long term dividend payment.
There are myriad reasons why the expectation may become better or worse. A reduction in alcohol duty would guarantee a rise in distilling companies making whisky. An increase in VAT would hit retailers. More technically, a positive or negative assessment of a company's management ability could change investor sentiment enormously.
So why do companies go through all this daily public examination and give shareholders votes to - in extremis - remove directors from their positions of power?
The simple answer is that "floating" - selling shares in their companies to anonymous investors - raises millions of pounds to allow those same companies to expand into bigger and hopefully better businesses. Companies and shareholders alike have a responsibility to each other.
No comments:
Post a Comment