Categorization Effects and Shareholders' Attitude in Bangladesh

Abstract

This paper briefly presents research findings regarding the categorization effects on the shareholders' attitude in Bangladesh. The Securities and Exchange Commission classifies all listed companies into different categories on the basis of some specific criteria in order to protect the interest of investors. This paper reveals that there are two schools of thought regarding categorization effects on shareholders' attitude. One school views that investors prefer and buy the company's shares on the basis of categorization. They want to invest in the companies on the priority basis from the various categories serially in order to reduce risks. Thus they encourage categorization system and think that they are getting benefit from the categorization system. The other school views that categorization is irrelevant, as it cannot affect the value of the firm in a perfect market. It reveals that investors prefer to invest in the companies' shares on the basis of growth rate and future prospects. They do not emphasize more on payout ratio and on AGM. They think that categorization cannot be useful for valuation of growth companies.