Indice
The stability of the stock market depends on the quality of the securities traded, and thus on the quality of the companies they represent.
Financial markets are also consequently affected by these circumstances. The money advanced by investors on the stock exchange is supposed to be used by a market player who has every interest and ability to compete in the market in order to make profits. However, it is not known whether this will really happen, i.e., whether the financed company will really be able to generate profits and not losses, and thus be able to pay back what it borrowed.
When a firm is listed, it is therefore assumed that the money advanced by investors is used to realise goods or services, i.e. to purchase what is necessary to realise the production process. If all goes well, the organised activity produces added value, and those who have purchased shares can obtain a profit, as well as the re-establishment of capital. The investor therefore bets on this future, uncertain event. It is called speculation, and it is the heart of financial capitalism.
In the one-contracting-party economy, however, the market is characterised by companies that only appear to be productive, but are in fact unable to manage entrepreneurial risk, since they are not genuine enterprises but rather branches of a single group enterprise. Share prices can therefore be easily inflated, not so much by the expectations of investors, and thus by more or less rational or irrational behavioural trends, but by a causal trend linked to a fundamentally uncoupled and pre-established business and market structure.
If the economic fundamentals of listed firms are uncoupled, one must expect that these genetic contradictions will have an impact on the markets, and in the long run, on financial stability.
In other words, the fragmentation of the global firm into several corporate entities allows significant portions of the enterprise risk to be transferred to companies without a true entrepreneurial organisation, which ultimately results in the de-empowerment of international investors through the support of ‘creative’ finance.
Listed subsidiaries, precisely because they are valued by the market on the basis of a range of economic, asset, and financial factors (value added, cash flows, net profit, and parameters related to capital profitability or indebtedness), transmit to financial markets the consequences of the potential manipulation of prices and transactions typical of the one-contracting-party apparent economy.
In this case as well, the greater the expansion of intra-group international trade, the stronger the negative impact on finance.
Analysing the phenomenon from a financial perspective through statistical data is an extremely complex task, with the current detection tools, its quantification would be practically impossible. Acquisitions, mergers, demergers, incorporations, transfers of shareholdings, and the establishment and closure of newcos occur on a daily basis and at an astonishing speed; each transaction corresponds to a transfer of business units and/or a fragmentation of responsibilities, that is, a transfer of enterprise risk.
Such an objective could only be achieved through a well-designed combination of innovative institutional databases and regulations supporting data collection.
As previously mentioned, it is believed that the economic indicator for detecting manipulations and anomalies in intra-group transactions may also be applied to financial flows and, consequently, to financial markets.
The result could be surprising in terms of forecasting and preventing financial crises.
Before a market crisis becomes explicitly manifest, there are intermediate stages that precede it — signals arising from the geographical and corporate relocation of the internal turnover within group companies, aimed at responding to the initial signs of crisis, which management first attempts to contain by offloading workers, costs, and debts onto subsidiaries specifically designated for this purpose.