Give the disadvantages of equity shares. (Imp)

Solution

These are as follows :

1. Excessive issue of equity shares may lead to over-capitalisation.

2. The affairs of the company can be manipulated by the powerful group of equity shareholders.

3. If the company issues only equity shares, it will lose the opportunity of trading on equity by issuing other securities.

4. Higher dividends on equity shares during prosperous periods push up their market value and generally lead to speculation.

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