Preface

The operation of every listed company is closely related to two markets: the industrial market and the capital market. The industrial market focuses on profit creation, while the capital market pursues market value growth. These two are interdependent and inseparable. However, in actual operations, companies tend to focus more on product markets, with R&D and marketing departments often emphasizing profits and neglecting market value management. Only a few listed companies are able to effectively combine these two types of thinking.
Next, we will explore common misconceptions about market value management, introduce its value, and why listed companies need professional market value management services.

Misunderstanding

At present, market capitalization management seems to be regarded as a ridiculed concept in the market. Some listed companies, in order to increase their stock prices, will cater to market trends, follow the trend of speculation, use hot concepts, and even change their company names, which is called market capitalization management.
What is even more worrying is that according to research by Minsheng Securities, some companies use block trades, private equity funds, and other methods to jointly manipulate stock prices, in order to conceal the behavior of major shareholders or executives reducing their holdings at high prices.
Many listed companies either view market value management as a temporary expedient or see it as a mysterious financial technique that cannot be expressed in words.
Therefore, market value management is simply understood as a means to boost stock prices and has become a ridiculed concept.
In fact, according to the experience of foreign capital markets, market value management has become an important component of value management for listed companies, and value management is also one of the core contents of corporate governance.

The "China Corporate Governance Report" points out that overseas listed companies have deeply adopted the concept of market value management in various fields such as daily operations, investment decisions, employee incentives, and investor relations.
The core of enterprise value management lies in optimizing operations, adopting the best financial policies, and utilizing funds reasonably to ensure the long-term stable development of the enterprise, while meeting the interests of all parties, continuously increasing the wealth of the enterprise, and maximizing the overall value growth of the enterprise.
In practice abroad, especially in overseas listed companies, capital structure, cost, and utilization are optimized by adjusting the debt to equity ratio to ensure that stock market prices match their true values. At the same time, establish a sound corporate governance and information disclosure system, provide sufficient incentives for employees, and form an organic unity between maximizing enterprise value and shareholder value.

Value

The core value of market value management can be seen from three aspects:
Firstly, market value management helps to enhance the level of corporate governance. It can align the interests of management and investors, reflected through stock prices, thereby solving the motivation problem of market value management for listed companies.
According to empirical research by McKinsey, excellent corporate governance can bring over 20% additional market value to listed companies, and over 80% of institutional investors are willing to pay higher prices for stocks of companies with better governance.
In addition, research has shown that companies with better corporate governance have a strong relationship between earnings and stock returns, meaning that when earnings are announced, the stock price increases significantly. Therefore, excellent corporate governance helps to reduce the cost of capital.

Secondly, market value management helps to communicate value creation externally and reduce opaque risk premiums. According to the research of Ma Lianfu from the Corporate Governance Research Center of Nankai University, the visibility of a company even has a greater impact on its stock price than the company itself. Investor relations management is an effective means of increasing the visibility of listed companies in the capital market, helping investors understand the company and attract securities analysts and potential investors.
For listed companies, enhancing company visibility is an important goal of capital market operations. Market value management has a significant visibility effect on institutional factors of the company, which can reduce the risk expectations of analysts and institutional investors. From the discounted cash flow model, when risk compensation decreases, the valuation of the company will increase.
Finally, market value management helps achieve dynamic balance between internal and external factors. It is the bridge between listed companies and the market, and listed companies need to actively guide the market, unify their thinking, and strive for widespread market recognition. By guiding stock prices back to intrinsic value, suppressing irrational fluctuations, and achieving a dynamic balance between company market value and intrinsic value.

How to effectively manage the intrinsic value and market value of listed companies?

Firstly, for listed companies, it is crucial to establish the correct concept of value management and market value management.
1、 The core of market value management should be value management, that is, enhancing the intrinsic value of the enterprise is the fundamental goal. Enterprises should pay attention to stock prices, but should not manipulate them to cater to the market. Only by continuously improving the comprehensive strength of the enterprise can the market value of the enterprise continue to grow.
2、 Maximizing shareholder value is a comprehensive goal of "dual value management", but it is not the only goal. In order to continuously create maximum value for shareholders, enterprises need to continuously optimize their business strategies, improve their governance level, and enhance external relationships, especially investor relations, in order to achieve sustainable and scientific development of the company.
3、 Market value management and value management are both long-term mechanisms. Both of these are not something that can be achieved overnight, and require enterprises to carry out long-term planning and implementation in various aspects such as operation and governance.
Secondly, from the perspective of value creation.
1、 Every enterprise should develop its own long-term business strategy and goals, and dynamically adjust its short-term business strategy based on the company's tasks at different stages. In addition, enterprises should continuously improve their business and profitability by combining their own resources and target customers, building their own business models, and continuously optimizing them.
2、 Enterprises should understand how to grasp the key links in their value chain. Every company has its own business, but not all businesses and processes can create equal value. Therefore, enterprises should choose their areas of expertise for deep cultivation in order to maintain the deepening and innovation of their business.
3、 In order to achieve maximum value, enterprises must achieve the optimal capital structure. Entrepreneurs should learn how to use various financing tools and arrange the proportion of equity and debt reasonably according to the actual situation, in order to use the financing method with the lowest cost of capital as much as possible.
4、 A good corporate governance structure can ensure the normal operation and healthy development of enterprises. Equity incentives are an effective way to enhance corporate governance. By designing a well-designed equity incentive mechanism, management and employees can become shareholders of the company, thereby motivating them to work hard for the development of the enterprise. Enterprises can design suitable equity incentive models based on their own situation, such as performance stocks, stock options, restricted stocks, etc.

Finally, from the perspective of business value.
Firstly, listed companies should actively manage investor relations, as good investor relations can help enhance corporate value. Specific measures include optimizing information disclosure, media public relations, fulfilling social responsibilities, dividend distribution, investor communication, and company crisis management.
Secondly, China's capital market is to some extent influenced by policies, which means that the value of enterprises may be affected by external factors such as money supply and national macro policies. Therefore, in addition to creating and realizing internal value, timely attention should also be paid to the trends of national macroeconomic policies and corresponding adjustments should be made.
In the process of value management and market value management, listed companies should find ways that are suitable for their own development stage, continuously improve their corporate value, and achieve more stable operations.

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