Common Shareholders Can Exert Control of the Management of the Firm

question 63

Multiple Choice

Common shareholders can exert control of the management of the firm by:

• A)requiring the firm to unionize.
• B)directly replacing management with themselves.
• C)buying shares in an initial public offering (IPO) at a discounted price.
• D)electing board members who can replace the management.
• E)buying shares in a second firm at a substantially reduced price.

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Definitions:

Lockup Agreement

A contractual clause preventing company insiders, such as employees and investors, from selling their shares for a certain period following an initial public offering (IPO).

Underwriting Contract

An agreement between an underwriter and an issuer of securities, in which the underwriter agrees to buy and subsequently resell the issue of securities.

IPO

Initial Public Offering, the process through which a private company offers shares to the public for the first time to raise capital.

Allocation Percentage

The portion of an investment portfolio or fund dedicated to a specific asset class, sector, or individual security, usually expressed as a percentage.