WHAT IS THE RELATIONSHIP BETWEEN COMMON SHARE PRICES ANDPREFERRED - ProProfs Discuss
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What is the relationship between common share prices andpreferred share prices?



Asked by Isaiah, Last updated: Oct 11, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

There isnt a strict relationship between common share prices and preferred shareprices. you have to remember that common shareholders have basically purchased apiece of the company and have claims on all equity items including retained earnings.as profits rise and the companys prospects look good, common share prices tend torise as well. preferred shareholders do not have the same kind of claim on thecompany. preferred shareholders generally receive a fixed dividend and dont share inany other equity ownership claims on the company other than the par value of theirown shares. so while a common stock can soar in price, its not unusual for a preferredshare to move very little or remain, for the most part, unchanged.
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