The Primary Reason for Creating Dual or Multiple Classes of Stock

question 56

Multiple Choice

The primary reason for creating dual or multiple classes of stock has to do with:

• A) Exchange listing requirements.
• B) Satisfying TSX bylaws.
• C) Freezing out minority shareholders.
• D) Paying for acquisitions.
• E) Control of the firm.

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Definitions:

Positive Externality

An economic situation where a third party benefits from a transaction or activity they are not directly involved in.

Negative Externality

A cost suffered by a third party due to an economic transaction or activity, without compensation, such as pollution from a factory affecting nearby residents.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning that one person's consumption does not reduce the availability to others, and it's hard to prevent people from using them.

Nonrivalry-in-Consumption

A characteristic of certain goods where one person's consumption does not reduce the availability of the good for consumption by others.