of borrowing money is that the firm maintains control of its operations and is not subject to shareholders.

Issuing stock involves selling off company ownership to the public and becoming responsible to a board of

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17.2 • How Households Supply Financial Capital 413

directors and the shareholders.

The benefit of issuing stock is that a small and growing firm increases its visibility in the financial markets and

can access large amounts of financial capital for expansion, without worrying about repaying this money. If the

firm is successful and profitable, the board of directors will need to decide upon a dividend payout or how to

reinvest profits to further grow the company. Issuing and placing stock is expensive, requires the expertise of

investment bankers and attorneys, and entails compliance with reporting requirements to shareholders and

government agencies, such as the federal Securities and Exchange Commission (SEC).
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