Equity capital market ECM is an important part of the capital market. In this market, companies and financial institutions raise funds and provide equities using the shares of their own businesses. Investors invest in the company by purchasing the shares or equities.
Company stocks are the prime financial instrument of the equity capital market. This instrument is provided and maintained by the companies or the financial institutions themselves. The reputation of the stocks in the equity capital market is largely dependent on the companies themselves, because the it is maintained by different types of financial data provided by the companies.Equity capital market ECM teams from different investments banks are responsible for helping companies execute primary market transactions by managing structure, syndication, marketing and distribution.
Also Explore: Capital Market
The provided data helps the investor understand the present position and the future of the company in the equity capital market. When the investor is satisfied, he or she makes the investment and the money grows with the company.
In certain situations, the result may not be beneficial to the investor. The companies also provide regular dividends to these investors.
Participants in the equity capital market range from huge companies to small individual investors. In the past, wealthy individuals dominated the market, but market trends are different now. The introduction of institutional investors has improved the market, and today they are playing the dominant role.
In addition to different types of company stocks, the equity capital market provides financial instruments known as derivatives. Futures, swaps and options are among these derivatives. The value of these instruments derives from the equities themselves.
The equity capital market ECM and the debt capital market together form the capital market. The primary difference between the equity capital and debt capital markets is the amount of risk and return related to them. The equity capital market is known for its huge returns and its high risks. On the other hand, the debt capital market is far more secure than the equity market but the returns are low.