Preferred shares carry no voting rights. Instead, they offer regular income (on a fixed basis) and have priority over common equity in dividend payments. These characteristics are clearly mirrored by ‘preferreds’ in French law (actions à dividende prioritaire sans droit de vote) and German law (Vorzugaktien). Not all jurisdictions require all preferred shares to be stripped from voting rights, but this is the most common structure. Preferred shares in the United States are more similar to fixed income instruments, while preferred shares in continental Europe pay less attention to regularity of income. Such instruments are designed to give the investors extended share in annual company earnings (i.e. up to 150% of dividends on common stock).
KeywordsConvertible Bond Common Equity Prefer Share Debt Instrument Capital Requirement Regulation
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