ABSTRACT
This chapter considers some economic issues that arise in corporate law and financial markets. Economics is now considered just as integral to the study of corporate governance and the regulation of securities markets, as it is to antitrust law or public utility regulation. The chapter examines how the characteristics of the corporation usually make it the best type of business organization to use for the purpose of raising capital. A business can be carried on through many different forms of business organization. In the United States, the most important of these forms are the corporation, a partnership, a trust, and the sole proprietorship. In general, financial interests in a corporation can be classified into two broad categories: debt and equity. Preferred stock is essentially a debt of the firm, except that it usually has no prescribed date of maturity, and payment of the dividend on preferred stock, although certainly customary, is not legally required.
