Does the profit of a company directly affect its stock or indirectly by causing people to buy or sell?
The short answer to your question is yes.  Company performance affects stock price only through investors' views. But note that selling for higher and lower prices when the company is doing well or poorly is not an arbitrary choice.  A stock is a claim on the future cash flows of the firm, which ultimately come from its future profits.  If the company is doing well, investors will likely expect that there will large cash flows (dividends) in the future and be willing to pay more to hold it (or require more to sell it).   The price of a stock is equal what people think the future dividends are worth.  If market participants started behaving irrationally, like not reacting to changes in the expected future cash flows, then arbitrageurs would make a ton of money trading against them until the situation was rectified. people implicity agree to sell stocks when a company does bad But, remember, when you sell the stock of a company that, in your estimation, 'did bad', someone else had to buy; otherwise, there is no sale. The someone else who bought your shares evidently disagrees with your assessment. Did you sell because the company didn't earn a profit at all? Did it not earn a profit because it's in a dead-end business that is slowly but inevitably declining to zero? Something like Sears Holdings? Or did it not make a profit because it is in an emerging market that will possibly someday become hugely profitable? Something like Tesla, Inc.? Did you sell because the company made a profit, but it was lower than expected? Did they make a lower-than-expected profit because of lower sales? Why were the sales lower? Is the industry declining? Was the snow too heavy to send the construction crews out? Did the company make a big investment to build a new plant that will, in a few years, yield even higher sales and profits? What are the profits year-over-year? Increasing? Declining? Usually, investors are willing to pay a premium, that is more than expected, for a stock in a company with robust growth.  As you can see, the mere fact that a company reported a profit is only one of many factors that determine the price of the shares in the market. "Yes, the price of a stock is what investors think the value of a stock is, which is not tied to profits or dividends by any rigid formula. But to say that therefore the price could be high even though the company is doing very poorly is hypothetically true, but unlikely in practice. Consider any other product. There is no fixed formula for the value of a used car, either. If everyone agreed that a rusting, 20-year old car that doesn't run is worth $100,000, then that's what it would sell for. But that's a pretty big ""if"" at the beginning of that sentence.  If the car had been used in some hit TV show 20 years ago, or if it was owned by a celebrity, or some such special case, maybe a rusting old car really would sell for $100,000. Likewise, a stock might have a price higher than what one would predict from its dividends if some rich person wanted to buy that company because the brand name brings back nostalgic memories from his youth and so he drives the price up, etc. But the normal case is that, in the long term, the price of a stock tends to settle on a value proportional to the dividends that it pays. Or rather, and this is a big caveat, the dividends that investors expect it to pay in the future. And then adjusted for all sorts of other factors and special situations, like the value of the company if it was to be liquidated, etc."
It's tempting to think of a corporation as a real thing, because in many respects it seems to be. But it isn't a corporeal thing (despite the root word of the name). It may own corporeal things, and employ corporeal people, but it is not itself a real thing. Borrowing heavily from Prof Joseph Heath: It might be better to think of a corporation as the nexus of four separate entities: investors who provide capital, employees who do the work, suppliers who provide raw material, etc., and customers who purchase the products or services the corporation buys. In different organizations the 'owners' are different: in co-ops it's the suppliers, mutual insurance companies the customers, in employee-owned companies the employees, but in 90% of cases (including Monsanto) it's the investors. The investors who provided capital by buying shares of stock are the owners, and will be compensated. This frequently happens indirectly: You may own Monsanto stock through a mutual fund or other such aggregate which means that your mutual fund will get the money. Whether that winds up being a profit or loss is more complicated. Why wouldn't you expect a long-term profit?  Say you buy 100 shares of company X, selling for$1/share today.  You hold it for 20 years, after which it's worth $10/share (in inflation-adjusted dollars).  So you've made a profit, only making two trades (buy & sell).  What the algorithmic traders have done with short-term trades during those 20 years is irrelevant to you. Now expand the idea.  You want some diversification, so instead of one stock, you buy a bit of all the stocks on whatever index interests you, and you just hold them for the same 20 years.  How has what the short-term traders done in the intervening time affected you? Say a stock is listed in Nasdaq, and the same company has a stock listed in Tsx. Does the Nasdaq price affect the Tsx price as trading commences? Not directly. Basically, an exchange is a market, and the price is defined only by supply and demand in that market. However, any substantial price differential for a commodity traded in multiple market creates an arbitrage opportunity, and there are many traders whose job it is exactly to find and use such opportunities. Their activity in turn has the effect of reducing the price differentials to the point where transaction costs make them unprofitable. With high-frequency traders around, the time for a price differential to disappear is nowadays measured in milliseconds. If a trader buys from one exchange, will it affect the price of the other? Only through the mechanism mentioned above.  Are there any benefits to being listed in two exchanges? It increases the liquidity of a stock. News about a company is not the only thing that affects its stock's price. There is also supply and demand.  That, of course, is influenced by news, but it is not the only actor.  An insider, with a large position in their company's stock, may want to diversify his overall portfolio and thus need to sell a large amount of stock.  That may be significant enough to increase supply and likely reduce the stock's price somewhat. That brings me to another influence on stock price: perception.  Executives, and other insiders with large positions in their company's stock, have to be careful about how and when they sell some of that stock as to not worry the markets.  Many investors watch insider selling to gauge the health of the company. Which brings me to another important point.  There are many things that may be considered news which is material to a certain company and its stock.  It is not just quarterly filings, earnings reports and such.  There is also news related to competitors, news about the economy or a certain sector, news about some weather event that affects a major supplier, news about a major earthquake that will impact the economy of a nation which can then have knock-on effects to other economies, etc... There are also a lot of investors with varying needs which will influence supply and demand.  An institutional investor, needing to diversify, may reduce their position in a stock and thus increase supply enough that it impacts the stock's price.  Meanwhile, individual investors will make their transactions at varying times during the day.  In the aggregate, that may have significant impacts on supply and demand. The overall point being that there are a lot of inputs and a lot of actors in a complicated system.  Even if you focus just on news, there are many things that fall into that category. News does not come out at regular intervals and it does not necessarily spread evenly.  That alone could make for a highly variable environment. "There are a LOT of reasons why institutional investors would own a company's stock (especially a lot of it). Some can be: The company is in one of the indices, especially big ones. Many asset management companies have funds that are either passive (track index) or more-or-less closely adhere to a benchmark, with the benchmark frequently being (based on/exactly) an index. As such, a stock that's part of an index would be heavily owned by institutional investors. Conclusion: Nothing definitive. Being included in an equity index is usually dependent on the market cap; NOT on intrinsic quality of the company, its fundamentals or stock returns.  The company is considered a good prospect (growth or value), in a sector that is popular with institutional investors. There's a certain amount of groupthink in investing. To completely butcher a known IT saying, you don't get fired for investing in AAPL :)  While truly outstanding and successful investors seek NON-popular assets (which would be undervalued), the bulk is likely to go with ""best practices""... and the general rules for valuation and analysis everyone uses are reasonably similar. As such, if one company invests in a stock, it's likely a competitor will follow similar reasoning to invest in it.  Conclusion: Nothing definitive. You don't know if the price at which those institutional companies bought the stock is way lower than now. You don't know if the stock is held for its returns potential, or as part of an index, or some fancy strategy you as individual investor can't follow. The company's technicals lead the algorithms to prefer it. And they feed off of each other. Somewhat similar in spirit to #2, except this time, it's algorithmic trading making decisions based on technicals instead of portfolio managers based on funamentals.  Obviously, same conclusion applies, even more so. The company sold a large part of the stock directly to institutional investor as part of an offering. Sometimes, as part of IPO (ala PNC and BLK), sometimes additional capital raising (ala Buffett and BAC) Conclusion: Nothing definitive. That investor holds on to the investment, sometimes for reason not only directly related to stock performance (e.g. control of the company, or synergies). Also, does the fact that Inst. Own % is high mean that the company is a good investment and/or less risky? Not necessarily. In 2008, Bear Stearns Inst Own. % was 77%" This is an old question that has an accepted answer, but it has gotten bumped due to an edit and the answers given are incorrect. I am assuming this means that every other Friday, the company is going into the open public market, buying those shares and then giving it out to the employees. No. Companies will internally hold shares that it intends to offer employees as additional compensation. There are no open market transactions, so the market price of the stock does not change (at least not due to buying pressure).  The only net effect is an equivalent expense for the compensation, but that should already be accounted for in the share price as normal operating expenses. These share may come through an initial buyback from the market, but more common is that when companies issue new shares they keep some internally for exactly this situation.  If they issued new shares every pay period, it would dilute the existing shares several times a quarter which would be difficult to account for. 1) Explicitly, how a company's share price in the secondary market affects the company's operations. (Simply: How does it matter to a company that its share price drops?) I have a vague idea of the answer, but I'd like to see someone cover it in detail.  2) Negative yield curves, or bonds/bills with negative yields  Thanks! The shareholders have a claim on the profits, but they may prefer that claim to be exercised in ways other than dividend payments. For example, they may want the company to invest all of its profits in growth, or they may want it to buy back shares to increase the value of the remaining shares, especially since dividends are generally taxed as income while an increase in the share price is generally taxed as a capital gain, and capital gains are often taxed at a lower rate than income.