The Role of Capital Market Intermediaries in the Dot-Com Crash of 2000

The role of Capital Market Intermediaries in The Dot-Com Crash of 2000

What is the intended role of each of the institutions and intermediaries discussed in the case for the effective functioning of capital markets?

The roles of institutions and intermediates are:

Investment Bank Underwriters:

They help entrepreneurs in the actual process of issuing initial public offerings, and they provide advisory financial services, helping the companies price their offerings, underwrite the shares. Besides, they also introduce the shares to investors.

b) Venture capitalists:

Venture capitalists play a role in providing capital for companies in their early stages of development and screening entrepreneurial teams and good business ideas from bad ones. They recruit business people who worked closely with their portfolio companies to both guide and monitor them to a specific point where they have turned a business into a well- managed fully functional company which could stand on its own. Moreover, the companies can nurture themselves until they reached a point where they were ready to face the scrutiny of the public capital markets after an Initial Public Offering.

c) Sell-Side analysts:

The primary role of sell-side analysts is to publish research on public companies and involved talking to and developing relationships with the managements of the companies. Their job involves identifying following trends in the industry, and ultimately making buy or sell recommendations on the stocks as well.

d) Buy-Side Analysts and Portfolio Managers:

They are usually assigned to a group of companies within a certain industry. They are responsible for conducting industry research, communicate with the companies' management teams, following up with valuation analysis, earnings estimates, and rating the stock prices of the companies as either buys or sells the stock. They also need to convince the portfolio managers as the portfolio managers are responsible for buying or selling securities.

e) The Regulator-FASB :

It establishes financial accounting and reporting standards which guide and educate the issuers, auditors, accountants and users.

f) Accountants and Auditors:

Independent accountants