Joint stock companies offer several advantages, such as:
Limited Liability : Shareholders' liability is typically limited to the amount they have invested in the company, protecting their personal assets from business debts and liabilities.
Capital Accumulation : Joint stock companies can raise significant capital by issuing shares to a large number of investors, allowing them to undertake large-scale projects or investments.
Transferability of Shares : Shares in joint stock companies are generally freely transferable, providing liquidity to investors and making it easier to buy or sell ownership stakes in the company.
Continuity of Existence : The company's existence is not dependent on the status of its shareholders. Even if shareholders change, the company continues to exist, providing continuity in operations and investment.
Professional Management : Joint stock companies often attract skilled and professional management due to their size and complexity, which can enhance operational efficiency and decision-making.
However, joint stock companies also have limitations, including:
Complexity and Regulation : Operating a joint stock company involves compliance with various legal and regulatory requirements, which can be complex and time-consuming, particularly for smaller businesses.
Risk of Agency Problems : The separation of ownership and control in joint stock companies can lead to agency problems, where managers may prioritize their interests over those of shareholders, potentially resulting in conflicts of interest or inefficiencies.
Shareholder Disputes : Disagreements among shareholders over company policies, strategies, or distribution of profits can lead to conflicts and even litigation, which may disrupt the company's operations and affect its performance.
Risk of Takeovers : Publicly traded joint stock companies are susceptible to takeover attempts by other firms or investors, which could result in changes to the company's management or strategic direction, potentially against the wishes of existing shareholders.
Market Volatility : Share prices in joint stock companies can be subject to significant fluctuations due to market dynamics, economic conditions, or company-specific factors, leading to volatility and potentially affecting investor confidence.
