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I have some questions about the relation between corporate management and the stock market that I think will impact my personal investments:
Does the management of public companies try to influence the price of their company's stock? If so, why do they do it? How does influencing stock prices tie into managing the operations of the company? Are these practices formally disclosed?
If management tries to influence stock prices, do they want the stock to go down? or up? Why?
Yes sometimes management does care about the stock price. And if they care about the price then some of them will be concerned about certain actions that may impact the stock price.
So why do they care? Their compensation for this year is dependent of meeting certain stock price metrics. They may get a bonus for making these goals. If their past compensation includes either shares or options that became shares then their net worth is linked to the stock price.
Sometimes that linkage is good. A rising stock price keeps many investors happy. If that rising stock price is due to improving fundamentals then the rising price is good.
Sometimes the linkage is bad. Management knows that if this quarterly number is released then the price will drop and they won't get the bonus. So they direct the team to work harder to improve the number before it has to be released. But in doing so they cause another number to drop. That drive to make the quarterly number may mean that next year the company may be less healthy but that is an issue for next year.
Sometimes the linkage is evil. Management leads an effort to manipulate the numbers to make the the company appear healthy. That can mean that the rise is artificial and next year the stock will drop a ton unless the charade can be continued month after month.
Obviously in the third case these actions are not disclosed.
Sometimes the actions of the company are not just a numbers game. Sometimes they release a product before it is ready, so they will be able to claim it shipped by the deadline or to be able to report at least some sales.
