Common stock is a type of security that represents ownership in a corporation. It is the most widely available type of shares issued by a company and is what most people buy when trading stocks on an exchange. Common stockholders elect the board of directors and vote on corporate policies. They also have the right to receive dividends, although these are not guaranteed. Common stock is traded on exchanges and may be bought and sold by investors or traders.
Common stock comes with voting rights, which allow investors to vote for corporate directors and on policy changes and stock splits. However, some companies have two classes of common stock, one voting and one non-voting. Common stockholders also have a residual claim on the corporations assets and income in the form of dividends. In the event of liquidation of the corporation, common stockholders may have rights to the corporation's remaining assets, provided that the creditors and owners of preferred stock are repaid first.
Preferred shares come ahead of common stock in the preference ordering of being repaid if a company goes bankrupt. Preferred shares also often lack voting rights, but do come with regular and higher dividend payments.
