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Brunswick
3d ago
Corporations as Mini-Governments
Public corporations issue equity (shares), which are not liabilities in the accounting sense, but function similarly in economic terms: they represent a claim on future output and are highly sought after.
The act of issuing equity allows a corporation to obtain real economic resources now (capital, labor) in exchange for financial claims redeemable only under specific conditions (dividends, buybacks, capital gains).
So like a government:
A corporation creates a financial asset out of thin air (stock).
It uses that asset to command real resources.
The value of that asset depends on the issuer’s perceived credibility and productive capacity, just like a government’s currency depends on its economic and political stability.
Public corporations issue equity (shares), which are not liabilities in the accounting sense, but function similarly in economic terms: they represent a claim on future output and are highly sought after.
The act of issuing equity allows a corporation to obtain real economic resources now (capital, labor) in exchange for financial claims redeemable only under specific conditions (dividends, buybacks, capital gains).
So like a government:
A corporation creates a financial asset out of thin air (stock).
It uses that asset to command real resources.
The value of that asset depends on the issuer’s perceived credibility and productive capacity, just like a government’s currency depends on its economic and political stability.
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YODL
@YODL
♥︎ by author
3d ago
Thank you for explanation. Makes sense, food for thought
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