Theory vs. Practice

As discussed in the chapter, preferred stock offers an investor certain preferences over common stock in relation to dividends and liquidation value. In theory, these preferences should make preferred shares more attractive to potential investors than common stock. In practice, however, a majority of companies do not issue preferred stock, and most investors seem to favor putting their investment dollars into common shares. Discuss some of the reasons a company might not issue preferred stock, and why most investors choose common over preferred.