preemptive right is important to shareholders because it
A)allows managers to buy additional shares below the current market price.
B)will result in higher dividends per share.
C)is included in every corporate charter.
D)protects the current shareholders against a dilution of their ownership interests.
E)protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.

Question

Quizplus · Accepted Answer

Preemptive right provides current shareholders with the opportunity to maintain their proportional ownership in the company if new shares are issued. This prevents the dilution of their ownership interests and protects their voting power and potential future dividends.

Preemptive Right Is Important to Shareholders Because It