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Definition: Transaction in equity

National accounts

It should first be the case of a transaction between two units, and not the case of a restructuration of assets and liabilities/reclassification of units, normally recorded as other flows in the other changes in the volume of assets account (ESA95, §6.30).  A transaction in equity in this context is the action of "placing funds at the disposal of a corporation" (ESA95, §4.53), increasing the equity capital.  This is to be recorded in national accounts as a financial transaction, in shares and other equity (F.5).  In accordance with ESA95, §4.53 and 5.86, this transaction modifies the property rights of shareholders on the corporation (increasing them) and entitles the shareholders to receive dividends (even though this property income is not of a fixed or predetermined amount).  Therefore, a capital injection recorded as a transaction in equity may be considered having three characteristics:
 - Funds are placed at the disposal of a corporation, which have a large degree of freedom in the way of using it;
 - Shareholders are entitled to receive dividends;
 - New shares are issued (for an amount equal to the funds placed), in the case of corporations having the legal status of incorporated enterprises.
In particular, it should be emphasised that, in providing equity capital to the corporation, the government acts as a shareholder, normally with the expectation to receive higher dividends in return.  The actual payment of dividends to the shareholder would be an important criterion for treating the injection as equity.
Eurostat, "ESA 95 manual on government deficit and debt, 2002 Edition", Office for Official Publications of the European Communities, Luxembourg, 2002, Chapter II.2