Weak firms make investors miserable

Entry of weak companies into the capital market is making investors, especially the small ones, face a miserable condition. A section auditors of different financial institutions, especially the chartered firms, usually recommends companies that do not have minimum criteria to run any business, through resorting to underhand dealings.

After being enlisted with the capital market these companies cannot perform well. Even share prices of many companies fall below the face value, making investors lose confidence in the market. And a section of speculators also becomes very active in favour of these companies and targets the small investors who do not have a minimum concept about the capital market.

Director of Dhaka Stock Exchange (DSE) Minhaz Mannan Emon made these remarks at a workshop titled “The Financial Reporting Act, 2015” organized by DSE and Capital Market Journalists’ Forum (CMJF) on Tuesday in the capital. Emon said, “A company shows its financial statement increasing it several fold while entering the stock market.”

“During that time, sales and profits increased in many times. After listing in the market, this company fails to get profit and enters the ‘Z’ category within 2-3 years,” he said. However, if the auditor had properly audited financial statement for approval while coming to the IPO, investors could not lose their investments.

Financial Reporting Council (FRC) Chairman C Q K Mustaq Ahmed said, awareness can play a crucial role to remove illegal work. Unfortunately, everyone does not want to understand financial accounts, he said adding that, but this is very important to invest in the stock market. He mentioned that investment in capital market is risky. Hence, investors should gather knowledge before investing in the market, which will help them to get benefited.

DSE chairman Abul Hashem said that the balance sheet should properly be understood for investing in the stock market. He said, “The balance sheet is index of company. Hence, investors should follow this.” Those auditors who do not obey the rules, can be brought to the right track, he said and hoped that the FRC can do it.

DSE managing director Majedur Rahman said, supply of information in the stock market is very important for investors to build confidence in the market.
He expected information will be published accurately through the scrutiny of the FRCs. Besides, a good culture would be created in the publication of financial accounts, he hoped.