Corporate Finance

Introduction Investors rely on financial market places to provide reading on the value of financial instruments. This information grapheme is critical as it provides the tail end for investing decisions. When an investor buys a sh are of a public limited company, he/she would want a reasonable re disco biscuit on the investment for the level of risk assumed. In the limit, the share certificate might turn out to be a worthless piece of paper. Given that information is asymmetric between anxiety and the shareholders, the latter are confronted with a difficulty of adverse selection (buying the share of a mediocre company) and a righteous hazard problem (post contractual opportunism by management at once they have obtained the money of the shareholders). In order, to mitigate the problem of adverse selection and to discipline managers, financial markets have a crucial role to play. In a stock market therefore, investors would need information such as the average impart on a share, the dissemination of return, the standard deviation of return, the beta value of a share, the correlation of return of a share with that of other shares to assess any likely diversification benefits.

Investors would need such information to assess the efficiency of the management team in place, to decide on their buy/hold/ cuckold strategy and to re-adjust their portfolio of assets. This information role is critical for an emerging market, especially if the market is to grow and develop into a mature market. Basically, stocks are subject to two types of risk - market risk and non market risk. Non market risk, also called specific risk, is the risk that events specific to a company or its industry will adversely claim the stocks price. For instance, an increase in the cost of fossil oil would be expected to adversely affect the stock prices of the entire oil industry, while a major management change would alone affect that company. Market risk, on the other hand, is the risk that a particular stocks... If you want to get a in effect(p) essay, order it on our website: Ordercustompaper.com

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