The stock exchange is the secondary market and the companies sell their share in the initial public offering. By selling their securities in the IPO the companies have nothing to do with the stock market where the investor is doing the business. There are many reasons due to which a company tries to stabilize its stocks value. These are given in the text to follow:
Stake Holders from Within
The management of the company might have some shares of the company itself in the stock market. Company’s stock prices usually have a direct impact on the management’s salaries and there can be people in the management who have the bulk or some of the ownership of the company.
Reputation in Shareholders Eyes
If the shares of a certain company fail to perform in a longer period of time then the fault directly lies with the management team. The company’s shares might be isolated from investor’s preferences in the future. The stock owners can be at logger heads with the company management through some other channel. This will have a direct say in the company’s management organization in the future.
Funding
The company’s stock market performance is a direct indicator of their performance. Whether the company is prospering or it is going for bankruptcy. The people or organization who are going to finance the company take the securities earned and stocks prices into account before giving the debt. A good stocks perfo
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