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chapter 12 (strat)
Terms in this set (9)
limited liability for investor (adv. of public company)
means that the shareholders who pro-vide the risk capital are liable only to the capital specifically invested, and not for other investments they may have made or for their personal wealth.
transferability of investor ownership
through the trading of shares of stock on exchanges such as the New York Stock Exchange (NYSE) or exchanges in other countries. Each share represents only a minute fraction of ownership in a company, thus easing transferability.
—that is, the law regards a non-living entity such as a for-profit firm as similar to a person, with legal rights and obligations. Legal personality allows a firm's continuation beyond the founder or the founder's family
separation of legal ownership mgmt control
In publicly traded companies, the stockholders (the principals, represented by the board of directors) are the legal owners of the company, and they delegate decision-making authority to professional managers (the agents).
a concept that involves creating economic value for shareholders while also creating social value by addressing society's needs and challenges
concerns the mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.
describes a situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party.
-banks relying on "too big to fail"
market for corporate control
If a company is poorly managed, its performance suffers and its stock price falls as more and more investors sell their shares. Once shares fall to a low enough level, the firm may become the target of a hostile takeover when new bidders believe they can fix the internal problems that are causing the performance decline.
leveraged buyout (LBO)
a single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private.
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