Value, Kinetic & Safety Fund for Corporate: Governance of Stock Exchanges

Abstract

The 2008 economic crisis has taken a big toll and invariably no one is spared whether in business or not. Entrepreneurs, Legislators, Executives, Regulators & Experts are busy in finding out the reasons of such catastrophic economic failure ranging from greed, market incentives, liquidity crunch, failed supervision, imaginary & unrealistic mortgage contracts, over estimation, over expansion, over valuation, over expenditure, sentiments and what not! There is a consensus that it is man-made!! A number of commentators have suggested that if the liquidity crisis continues, there could be an extended recession or worse. The continuing development of the crisis prompted fears of a global economic collapse. The financial crisis is likely to yield the biggest banking shakeout since the savings-and-loan meltdown. Investment bank UBS stated on October 6 that 2008 would see a clear global recession, with recovery unlikely for at least two years. The failed one has a common character; they were widely held corporates, the listed companies. The author argues in his research that stock exchanges have failed to oversee their participating companies. The stock exchanges can introspect to evaluate if they could have smelled failure in advance; and if not then it is they who should be blamed on trusting them the stocks were valued and over valued in the market. Stock exchanges can create safety fund in future to save similar failures of those who at one time are transacting trade of stocks million times in a day. If a small fraction is levied and kept reserved in special fund, this can bail out the failed one. Diagnoses of such crisis and remedies are unending process. This is not the first and last crisis. The new economic crisis will occur at uncertain time due to some new pathogens. This research aims to defend pathological governance of stock exchanges. The researcher propose perpetual fund to be created and manage by stock exchanges of the value (levy based on price), by the value (Trader), for the value (To use in contingency). The paper discuss and propose permanent fund to bail out companies in time of distress without burden on public exchequer.

Keywords: Economic distress, bail out, permanent relief fund

JEL Classification: I00, Z00