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

Question

Quizplus · Accepted Answer

Preemptive right allows current shareholders the right to maintain their ownership percentage in the company by buying additional shares before they are sold to the public. This protects them from dilution of their ownership interests.

Preemptive Right Is Important to Shareholders Because It