Equity Participation

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Foreign Direct Investment - FDI

    An investment made by a company or entity based in one country, ...
  4. Outward Direct Investment - ODI

    A business strategy where a domestic firm expands its operations ...
  5. Exon-Florio Provision

    A provision that allows the president of the United States to ...
  6. Franchise disclosure document

    A Franchise Disclosure Document (FDD) is a legal document presented ...
Related Articles
  1. The Dangers Of Options Backdating
    Options & Futures

    The Dangers Of Options Backdating

  2. Investing In Brazil 101
    Investing

    Investing In Brazil 101

  3. Evaluating Executive Compensation
    Options & Futures

    Evaluating Executive Compensation

  4. Top 6 Factors That Drive Investment ...
    Entrepreneurship

    Top 6 Factors That Drive Investment ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center