What is a Share in Finance?

A share is one unit of ownership interest in a corporation. A share entitles its owner to a portion of the dividends and residual value of the issuing entity. A shareholder is also entitled to vote on certain issues at periodic shareholder meetings. Share ownership can be evidenced by a stock certificate, but can also be an electronic record.

The issuing corporation is under no obligation to buy back shares from investors. This increases the risk of shareholders, who therefore expect a high return on their investment, either in the form of dividends or an increased market value for their shares. When this does not happen, they are more likely to sell their shares, thereby driving down the market price of the shares.

Examples of Shares

The two types of shares are common (or ordinary) shares, and preferred (or preference) shares. There can be many types of preferred shares, such as Series A preferred, Series B preferred, and Series C preferred, each with its own privileges.