Definitions for overcapitalisation
This page provides all possible meanings and translations of the word overcapitalisation
(business) too much capitalization (the sale of more stock than the business warrants)
Overcapitalisation refers to an economic phenomenon whereby the valuation/ price of an asset is superior to its ‘real’ value – however difficult to define - therefore putting a strain on attempts to obtain a reasonable return on investment. This is especially the case when capital goods are at stake which are necessary to engage in the production of goods or delivery of services. It is less the case with those contemporary financial instruments that are valued not for their returns, but for their potential earnings upon resale. Overcapitalisation is closely related to assets inflation. As the financialisation of the economy has led to the monetisation of many non-financial assets, such as real estate, infrastructures, etc., overcapitalisation has become rife, with deleterious consequences at the level of firms, households, and individuals.
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"overcapitalisation." Definitions.net. STANDS4 LLC, 2014. Web. 22 Oct. 2014. <http://www.definitions.net/definition/overcapitalisation>.