What are publicly traded companies?


Quick Answer

Publicly traded companies are businesses with shares that may be distributed to the general public when purchased on the stock market. The shares are displayed on the market where they can be bought and sold by individual investors, and the companies must provide corporate financial information to their shareholders.

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Full Answer

Companies that sell their shares are owned in part by the public and are distinguished from privately owned companies in regard to valuation strategies that can be influenced by public shareholders. When shareholders invest in a publicly traded company, they can decide whether or not they wish to trade their shares and have the potential to decrease the company's value by selling its stock. If they choose to keep the shares, however, then the company's value increases.

Management structures of publicly traded companies can be advantageous to executives once public ownership disperses to a point at which shareholders hold few stakes in the business. These circumstances develop competition among investors who may regard the shares as having increased value, which they would then retain. Though public firms are mandated to comply with federal relations while their private counterparts are not, the public firms are likely to have a broader range of investors and maintain greater stability in value.

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