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In: Accounting

Is it good when the market share is under-priced or over-priced. Please explain

Is it good when the market share is under-priced or over-priced.

Please explain

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Expert Solution

No it is not good in both the cases beacuse it indicates that the true value of the market share is not being reflected which is an important requisite for efficient markets where perfect information is there . If the share is underpriced then the true value of the company will not be reflected and its market capitalisation will fall having a negative impact on its image , revenues etc. Whereas if the share is overpriced then it indicates that the true performance of the company is being reflected which is not there in reality and the company might not deserve such high market capitalisation.

So in short both the situations are not good for financials of the economy

ekkarill92 answered 2 years ago
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