|
What are the disadvantages of equity shares?
Following are the disadvantages of equity shares:
1) Cost of issue of equity shares is high.
2) The excessive use of equity shares is likely to result in over capitalization of the company
3) The issuing of equity capital causes dilution of control of the equity holders. In times of depression, dividends on equity shares reach low which leads to drastic fall in their market values.
4) Equity dividend is payable from post-tax earnings.
5) The cost of servicing equity capital is generally higher than the cost of issuing preference shares or debenture since on account of higher rise, the expectation of the equity shareholders is also high as compared preference shares or debentures
|
