Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Corp. Governance and CSR > Multi-Class Shares > Flashcards

Multi-Class Shares Flashcards

1
Q

What are multi-class shares?

A

Share structures with multiple classes of shares offering unequal voting rights.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Why typically holds super-voting rights?

A

Founders and insiders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the goal of issuing multi-class shares?

A

To retain control while raising public capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How do multi-class shares impact corporate control?

A

They create a separation between ownership and control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the main benefits of multi-class shares?

A

They reduce short-term market pressures and encourage long-term innovation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the main costs of multi-class shares?

A

Insider entrenchment and weakened governance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How do multi-class shares serve as an anti-takeover tool?

A

They prevent hostile takeovers by concentrating voting power in insiders’ hands.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the flexibility hypothesis?

A

Dual-class structures allow firms to focus on long-term goals without short-term interference.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the entrenchment hypothesis?

A

Dual-class shares enable insiders to prioritize personal benefits over shareholder value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How do multi-class shares impact shareholder rights?

A

They limit public shareholders’ voting power, reducing their influence on governance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is Rule 19c - 4?

A

A proposed rule to enforce one-share-one-vote for all listed firms in the US.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How do regulatory events relate to multi-class shares?

A

They change the probability of one-share-one-vote adoption, affecting firm valuations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What was the stock price response to increases in one-share-one-vote probability?

A

Positive for most firms, but negative for high-growth, innovative firms.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Why do innovative firms favor dual-class shares?

A

They reduce external pressures, fostering a focus on innovation and long-term projects.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How does strong monitoring impact the need for dual-class structures?

A

Firms with alternative monitoring mechanisms rely less on dual-class protections.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How do multi-class shares affect the market for corporate control?

A

They weaken traditional governance tools like shareholder voting and takeovers.

17
Q

What are private benefits of control in dual-class structures?

A

Perks or advantages insiders gain without necessarily benefiting other shareholders.

18
Q

What was Snap Inc.’s significant governance feature during its IPO?

A

It offered public shares with no voting rights.

19
Q

How do dual-class shares influence valuation?

A

They can increase valuation for innovative firms but reduce valuation for others.

20
Q

What is the role of index providers in dual-class governance?

A

They decide whether to include dual-class firms in major indices, influencing governance standards.

21
Q

What firms are most negatively impacted by one-share-one-vote enforcement?

A

Firms in innovative or high-growth sectors.

22
Q

Why might dual-class shares harm entrenched firms?

A

Entrenchment reduces responsiveness to shareholder interests.

23
Q

What alternative mechanisms can substitute for dual-class protections?

A

Strong boards, external monitors, and active institutional investors.

24
Q

How do regulatory changes test the impact of dual-class shares?

A

By analyzing stock price reactions to events affecting one-share-one-vote probability.

25
Q

What is the general shareholder view on dual-class shares?

A

They are often seen as reducing accountability and governance quality.

26
Q

How do multi-class shares impact voting equality?

A

They create significant voting imbalances between classes.

27
Q

What is the primary motivation for founders to retain dual-class shares?

A

To maintain decision-making control.

28
Q

How does one-share-one-vote impact market efficiency?

A

It aligns voting power with economic ownership, improving governance.

29
Q

Why do some index providers exclude dual-class shares?

A

To promote governance standards that emphasize shareholder equality.

30
Q

What is the overall trade-off of multi-class shares?

A

Balancing founder autonomy and innovation against shareholder rights and governance quality.

Corp. Governance and CSR (16 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions