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CFA Level I · CFA Level I Exam · Investors and Other Stakeholders

A government-owned airline is listed on a stock exchange, with the state holding 60% of the shares and private investors holding 40%. Relative to a fully privately owned listed airline, the airline is most likely to experience:

The airline most likely faces a greater risk that objectives other than maximizing shareholder wealth, such as employment or public policy goals, influence decisions. The state's controlling stake can conflict with minority investors, and listing still requires normal disclosure, with no guaranteed returns for minorities.

  1. Aa lower cost of equity because the state guarantees returns to minority shareholders
  2. Ba greater risk that objectives other than shareholder wealth maximization influence decisionsCorrect
  3. Can exemption from the disclosure requirements that apply to other listed issuers

Explanation

A controlling state shareholder may pursue policy goals such as employment or route coverage, creating potential conflict with minority shareholders' financial interests. States do not generally guarantee minority returns, and listed status still brings exchange disclosure rules, so the other options are wrong.

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