Penny Wise, Pound Foolish: Hong Kong’s Penny Stock Incident Case Solution & Answer

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Penny Wise, Pound Foolish: Hong Kong’s Penny Stock Incident Case Solution

This Case is aboutÂ CORPORATE GOVERNANCE, CRISIS MANAGEMENT, FINANCIAL MARKETS, TRANSPARENCY

PUBLICATION DATE: September 20, 2005 PRODUCT #: HKU427-HCB-ENG

During the year 2002, this caseâ€™s company issued a recommendations paper with suggestions for continuing listing qualifications for “penny” stocks. A panic selloff ensued as investors considered they were about to lose both the market for their shares as well as the protection of the listing rules. In one trading day, about 10% of the market capitalization for microcap was wiped out.Â Was this related to the exchange’s standing as a for profit entity following its demutualization? In order to cement its place in a competitive position against different financial centers and to lose investor doubt about the quality of listed firms, Hong Kong needs better rules to boost better corporate governance and market transparency.