Why is the capital cost of equity financing relatively high?

Equity financing is also ownership financing. It is a company that raises funds from shareholders. It is a financing method used by companies to establish or increase capital and expand shares.

The funds obtained from equity financing are the company's equity. Since it represents the ownership of the company, it is called ownership funds and is the main component of the company's equity funds or equity capital.

The issuance of equity financing allows a large amount of idle social funds to be raised by the company and can be used by the company during its existence.

Characteristics of equity financing: 1. The funds raised are permanent, have no expiration date, and do not need to be returned, which is extremely beneficial to ensuring the long-term stable development of the company.

2. There is no fixed dividend burden. The amount and whether the dividend is paid depends on whether the company is profitable and the company's operating needs. There is no fixed pressure to repay principal and interest at maturity, and the financial burden on the company is relatively small.

Small.

3. More investors subscribe for the company's shares, popularizing the company's capital and diversifying risks.

4. The issuance of new shares may dilute the company's control rights, resulting in a loss of expected annualized earnings from the control rights.

5. Financing channels: Equity financing is private placement, and public market debt financing is bank credit project financing.

6. In terms of risk, the risk of debt financing is higher than the risk of equity financing.

Warm reminder: The above content is for reference only.

Response time: 2021-08-18. For the latest business changes, please refer to the official website of Ping An Bank.