Skip to content

CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership

A large listed firm has thousands of small shareholders and professional managers who own little stock. The agency problem most likely to arise from this ownership structure is that managers may:

With dispersed ownership, managers with little equity may pursue personal interests such as excessive perquisites at shareholders' expense. This is the classic manager-shareholder agency conflict. Majority-minority shareholder conflicts instead arise when ownership is concentrated.

  1. Apursue personal interests such as excessive perquisites at shareholders' expenseCorrect
  2. Bbe unable to borrow because creditors hold residual claims
  3. Cface dominant controlling shareholders who expropriate minority holders

Explanation

Dispersed ownership separates ownership from control, creating a manager-shareholder conflict where managers may pursue their own interests. Controlling-shareholder expropriation is typical of concentrated ownership, and creditors do not hold residual claims.

Did you get it right without looking?

One question tells you little. A timed set on Organizational Forms, Corporate Issuer Features, and Ownership shows your real accuracy, how long you take and where you lose marks.

Practise Organizational Forms, Corporate Issuer Features, and OwnershipFree diagnostic mock

More Organizational Forms, Corporate Issuer Features, and Ownership questions