[candybar]

> First, companies want their stock price to go up. This is more important to them than profit margins, because the people making decisions (as are most employees) are renumerated largely in stock. Simply keeping a business profitable and stable will not increase stock prices, you need to convince investors that you have great plans which will make the company stronger. Hiring more employees makes this look more convincing.

Your other points are valid but this part is completely incorrect - Wall Street investors are extremely sensitive to costs and love high-margin businesses. No investor believes that just because you're hiring and increasing costs, that you will magically grow revenue. The cause and effect are almost in the opposite direction - strong past revenue growth (and consequent high stock prices) cause executives to be over optimistic about other opportunities, which lead to overhiring, which then allows the other effects you mention (which are valid) to take hold. But the root cause isn't stock prices going up because of overhiring, but as a rational response to past success.