CASE OF STUDY DOT-COM CRASH OF 2000
1. What is the intended role of each of the institutions and intermediaries discussed in the case for the effective functioning of the capital market? * Investors: Trade with proper education and information.
* Investment Banks (underwrites): provide advisory financial services, helped the companies price their offerings, underwrite the shares, and introduce them to investors, often in the form of a road show.
* Entrepreneurs and existing companies: their like to attract saving from savers to fund their business ideas Companies, but entrepreneurs typically have better information than savers on the value of business investment opportunities. Secondly, communication by entrepreneurs to investors is not completely credible because investors know entrepreneurs have an incentive to inflate the value idea.
* Capital Markets: provide a way for connect individuals and institutions who want to invest and companies which need capital. The public market should make a proper valuation of the companies which want to do an IPO, because that will effect on all intermediaries.
* Regulators (SEC, Financial Accounting Standards Boards - FASB): they are agents regulatory with mission of regulate the financial reporting of public companies and establish standards of financial accounting.
* Intermediaries: because the entrepreneurs typically have better information than savers on the value of business investment opportunities and communication by entrepreneurs to investors is not completely credible because investors know entrepreneurs have an incentive to inflate the value idea. The role these intermediaries are to close this gap of information. * Venture capitalists: the principal job is to screen good business ideas and entrepreneurial team from bad ones. * Brokers, Financial planners and the media: inform and tray to close the gap of information between parts. * Portfolio...
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