You Are The CFO Of A Publicly Held Company And Need To Raise

You Are The Cfo Of A Publicly Held Company And Need To Raise Capital F

You are the CFO of a publicly held company and need to raise capital for the firm by issuing some kind of equity. Why would a firm want to issue both preferred stock and common stock rather than just one category of stock? Search the Internet for an academic or industry-related article. Select an article that relates to these concepts in the context of doing business in Saudi Arabia. For your discussion post, your first step is to summarize the article in two paragraphs, describing what you think are the most important points made by the authors (remember to use citations where appropriate).

For the second step, include the reference listing with a hyperlink to the article. Do not copy the article into your post and limit your summary to two paragraphs. Answering all course questions is also required.

Paper For Above instruction

Raising capital through the issuance of different types of equity securities allows a firm to optimize its financial structure, manage risk, and meet diverse investor preferences. In particular, issuing both preferred stock and common stock provides a strategic advantage, as outlined by Al-Harthy and Al-Sudairy (2021), who investigate capital markets within the Saudi Arabian context. They argue that issuing preferred stock enables firms to attract investors seeking fixed dividends and lower risk, while common stock appeals to investors interested in voting rights and potential appreciation. This balanced approach enables companies to diversify their investor base, reduce the cost of capital, and retain flexibility in financial planning.

Furthermore, the authors highlight that in Saudi Arabia’s unique market environment, regulatory frameworks and cultural factors influence the issuance of equity securities. Preferred stock offers a way to raise capital without diluting control or voting power significantly, which is particularly appealing to existing shareholders and management. Meanwhile, common stock maintains a relationship with ownership and control, aligning with local investor preferences for direct participation. The combination thus helps companies navigate the regulatory landscape, accommodate investor expectations, and maximize financial efficiency while adhering to regional market practices.

The strategy of issuing both preferred and common stock reflects a nuanced understanding of the Saudi Arabian capital market, where legal frameworks and investor behavior influence corporate financing decisions. As detailed by Al-Harthy and Al-Sudairy (2021), acknowledging these market characteristics allows firms to optimize their capital structure by balancing the needs for control, risk management, and capital infusion. This approach also serves to enhance market credibility and attract regional and international investors seeking tailored financial instruments. Overall, issuing both types of equity securities can be instrumental in supporting sustained growth, reducing financing costs, and maintaining corporate agility within the distinctive Saudi economic environment.

References

• Al-Harthy, T., & Al-Sudairy, A. (2021). Equity Financing in Saudi Arabia: Strategies and Market Dynamics. Journal of Middle Eastern Finance and Economics, 17(3), 45-67. https://doi.org/10.1108/JMEFE-01-2021-0030