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

A private company is considering a listing on a stock exchange. Which of the following is the most likely consequence of becoming publicly listed?

Going public most likely gives the company greater access to capital while increasing disclosure and regulatory requirements. Compliance costs and outside investor pressure usually rise, and ownership becomes more dispersed with more freely transferable shares, so the other options describe the opposite effects.

  1. AGreater access to capital and increased disclosure and regulatory requirementsCorrect
  2. BLower costs of compliance and reduced pressure from outside investors
  3. CConcentrated ownership and restricted share transferability

Explanation

Listing widens the investor base and gives access to capital markets, but brings more disclosure, regulation and scrutiny. Compliance costs rise rather than fall, so B is wrong. Listing typically disperses ownership and improves liquidity, so C is wrong.

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