Equity Financing and Emission of Shares

Abstract

Commercial companies and corporations are created to achieve a common economic objective, which is the maximization of profit. Nevertheless, the existence of the initial capital in itself might be insufficient for achievement of maximization of profit. Therefore, during its activity, the company might encounter the need for increase in the capital. Equity financing is financing conducted through the acquisition of equity, which is the part of capital that is not debt materialized in shares owned by the company. Newly emitted and existing shares are traded in regulated markets such as the stock market. It must be stressed that this method of investment has certain risks to it, because if the company is liquidated or goes bankrupt, than the shareholders owning normal shares are the last in the order of preference to take the share that they have invested in the company, after the creditors and preferential shareholders.