Hypothetically let us imagine a publiclyfunded traded a corp

Hypothetically, let us imagine a publicly-funded/ traded a corporation. The corporation just issued a number of common shares at the market (capital market) by going through IPO process with an underwriter\'s (an investment banker) careful coordination, thus the corporation have received a large sum of capital from public via secondary capital market.

Thereafter, then why a corporation \"cares\" about their per-share price (market price) fluctuates every day, every minute, and every second at the exchange capital market by changing hands of investors ( via NYSE, NASDAQ)?

In other words, when the share price goes up, the corporation still Not receive any additional cash for the increased amount, vice versa, when the share price goes down, the corporation do Not have to return cash back to shareholders who already have purchased those shares at a higher price per share.

Then, again, why a corporation, especially to the management and board of directors, are so sensitive to and concerned their corporation\'s share price going up and down everyday?

Solution

A Company will have primary objective on its shareholder will be to increase value to Shareholders. Why because the management Board is an agent of shareholder\'s they are the principal.Shareholders has the power to vote in board meeting.

Share price also reflect the growth potential of the company as well as Performance indicator of management how well they undertaking operations. There will be Performance related pay offered to Board of directors inorder to match their objective to company primary objective of increasing value to shareholders. The better management work for their reward pay the companies value will also increase.

As part of performance related pay sometimes company offers Employee Share Option Scheme by which employees too becomes the owners of the company and they will be motivated to inrcrease company value.

Also Even though by selling shares company acquired a sum of money with, still there may required company to approach stock exchange if another situation required to rise capital for undertaking higher nvestment opportunities. Well in that case also is important the Share Price to be good in position by which Potential public are Willing to buy shares.