What are corporate securities?

Corporate securities are defined as financial instruments that indicate either an ownership stake in a corporation or a creditor relationship with the corporation. This reflects the dual nature of corporate securities, which can either represent equity—such as stocks that confer ownership and voting rights—or debt—such as bonds that establish a creditor relationship and entail repayment obligations by the issuer.

The nature of corporate securities is foundational to understanding how companies raise capital. When individuals purchase shares, they become equity holders, gaining a claim on a portion of the company's profits and assets. Conversely, when entities invest in bonds, they act as lenders, receiving interest payments and the return of principal without owning part of the company.

In contrast, other choices such as documents outlining shareholder agreements and voting rights, contracts involved in mergers and acquisitions, or liabilities accrued from operations do not directly define corporate securities. While they are related to corporate governance and financial operations, they do not represent the core concept of what constitutes corporate securities in the financial and legal framework. Thus, only the first option encompasses the broad scope of corporate securities as financial instruments representing either ownership or credit relationships.