CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership
A private company is considering an initial public offering. Which of the following is the most likely consequence of becoming a public company?
The most likely consequence is greater disclosure and regulatory reporting requirements. Public listing gives wider access to capital and more dispersed ownership, but the issuer must provide regular audited financial information and meet exchange and securities regulator rules.
- AReduced access to external capital markets
- BGreater disclosure and regulatory reporting requirementsCorrect
- CLower ownership dispersion among investors
Explanation
Public companies face extensive disclosure and listing requirements. Going public widens access to capital and typically increases, not lowers, ownership dispersion, so the other options point the wrong way.
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