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After IPO, the socks are traded between 3rd parties (let's assume the company's employees don't own shares), so why should the company care what's their (perceived) value on the market? After the IPO, the money they could have recruited from the public has already been recruited...

marked as duplicate by Nick, JTP - Apologise to Monica Dec 18 '16 at 22:12

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The folks who hold stock are the legal owners of the company. If a majority of stock holders become unhappy with the management of a company they can fire the executives and put in new management, or they can direct the company to close its doors and sell off its assets. As a crude approximation, the stock holders are happier when the stock price goes up and unhappier when it goes down. Therefore, executives are highly motivated to drive the stock price up.

A frequent criticism of corporate governence is that management can be so motivated to drive the stock price up, that they will take actions that drive the stock price up in the current year, even if undercuts the company in the long term.

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