Answer to Question #49311 in Macroeconomics for prashansa
disinvestment should be encouraged in india. discuss the macroeconomics impact of the same in the economy because of disinvestment.
Disinvestment refers to the use of a concerted economic boycott to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change. The term was first used in the 1980s, most commonly in the United States, to refer to the use of a concerted economic boycott designed to pressure the government of South Africa into abolishing its policy of apartheid. The term has also been applied to actions targeting Iran, Sudan, Northern Ireland, Myanmar, and Israel.
The common perception about the effectiveness of divestment lies in the belief that institutional selling of a certain stock lowers its market value. Therefore, the company's net worth becomes devalued and the owners of the company may lose substantial paper assets. In addition, institutional divestment may encourage other investors to sell their stocks for fear of lower prices, which in turn lowers prices even further. Finally, lower stock prices limits a corporation's ability to sell a portion of their stocks in order to raise funds to expand the business.