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Financial Services Firms: Governance, Regulations, Valuations, Mergers, and Acquisitions, 3rd Edition by Zabihollah Rezaee

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Chapter One

Fundamentals of the Financial Markets and Institutions

Introduction

More than half of all households (over 115 million) in the United States are now investing in the securities markets through private investments in company shares, mutual funds, and pension funds. Furthermore, due to the recent financial crisis, bank failures, the risks regarding Social Security, and the high-profile failure of some large pension funds, Americans are being forced to take responsibility for their financial future and retirement funds. The sustainability and financial health of public companies in general and financial services firms in particular is vital to keeping investor confidence high, and this sustainability requires public trust in the reliability of financial reports. Reliability of public financial information contributes to the efficiency, liquidity, and soundness of financial markets that may drive economic development and prosperity for the nation. This introductory chapter discusses the importance of our financial markets to the nation's economic prosperity, the promotion of the free enterprise system, the vital role of financial services firms in our society, and the importance of financial information as the lifeblood of financial markets.

Financial Markets

The efficiency, liquidity, and safety of the financial markets, both debt and capital markets, have been threatened by the recent financial crisis and resulting global economic meltdown. These threats have significantly ...

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