Equity Participation


DEFINITION of 'Equity Participation'

Ownership of shares in a company or property. Equity participation may involve the purchase of shares through options or by allowing partial ownership in exchange for financing. The greater the equity participation rate, the higher the percentage of shares owned by stakeholders. Allowing stakeholders to own shares ties the stakeholders' success with that of the company or real estate investment. In this case, a more profitable company will provide stakeholders with greater gains.

BREAKING DOWN 'Equity Participation'

Equity participation is used in many investments for two primary reasons. First, it is used to tie the financial rewards of executives to the fate of the company, increasing the likelihood that executives will make decisions that will improve company profitability. This type of compensation may be delayed, reducing the possibility of executives making short-term decisions to boost share price. Second, it is used by companies operating in emerging economies in which local governments want to reap the rewards brought on by development. Moreover, share ownership also allows local governments a say in company decisions.

  1. Direct Investment

    1. The purchase or acquisition of a controlling interest in a ...
  2. Overseas Private Investment Corporation ...

    A U.S. government agency that assists businesses looking to invest ...
  3. Outward Direct Investment - ODI

    A business strategy where a domestic firm expands its operations ...
  4. Foreign Direct Investment - FDI

    Foreign Direct Investment (or FDI) is an investment made by a ...
  5. Exon-Florio Provision

    A provision that allows the president of the United States to ...
  6. Rule Of 72

    A shortcut to estimate the number of years required to double ...
Related Articles
  1. Options & Futures

    The Dangers Of Options Backdating

    This form of executive compensation can pose serious risks for investors.
  2. Investing

    Investing In Brazil 101

    Brazil is well positioned for future growth, and luckily for investors, it also has a very liberal investing climate.
  3. Options & Futures

    Evaluating Executive Compensation

    Find out how to determine whether a CEO is being overpaid.
  4. Entrepreneurship

    Top 6 Factors That Drive Investment In China

    FDI in China surpassed $100 billion in 2010, certain key factors drive foreign direct investment.
  5. Economics

    Overseas Investing No Protection Against Downturn

    The U.S. economy affects many other countries. Find out what this can mean for overseas investments.
  6. Options & Futures

    Executive Compensation: How Much Is Too Much?

    The proxy statement can help determine whether a CEO is well compensated - or just overpaid.
  7. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  8. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  9. Entrepreneurship

    4 Things to Know About Your Company To Make a Successful Pitch to Investors

    Learn how to make a successful pitch to investors. Regardless of your industry, size or market, there are some questions all investors need to have answered.
  10. Entrepreneurship

    Top 4 Billionaires Living in Los Angeles

    Learn how these multibillionaires built their fortunes to stand out from the crowd of the countless ultra-rich who call Los Angeles home.
  1. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  2. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  3. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  4. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center