Question 1

In corporations that are said to be widely held, no one investor or group owns 51% or more of the stock.

Accepted Answer

In widely held corporations, no single investor or group owns a majority of the stock, which means no one has control over the company's decision-making process.

Question 2

Activist investors become catalysts for changes aimed at improving financial performance and increasing stock price by:
A)Gaining the support of other shareholders especially institutional investors that control large blocks of stock. ​
B)Seeking seats on the Board of the Directors ​
C)Vocalizing their proposed changes in management and strategy. ​
D)All of the above​

Accepted Answer

Activist investors typically use a combination of tactics to achieve their goals, including gaining support from other shareholders, seeking seats on the Board of Directors, and vocalizing their proposed changes in management and strategy. By doing so, they can effectively advocate for changes that they believe will improve the company's financial performance and increase its stock price. Therefore, the best answer is D, which includes all of these tactics.

Question 3

The biggest criticism of activist investors is that they force companies to return money to shareholders rather than reinvesting it in their businesses. That is likely to hurt those companies and the economy in the long run.

Accepted Answer

This is a commonly cited criticism of activist investors. By pushing for immediate returns to shareholders, companies may not have the resources to invest in long-term growth and innovation, which can ultimately harm both the company and the larger economy.

Question 4

Activist investors:
A)Seek the support of other stockholder to bring about change in a firm. ​
B)Propose changes to improve the financial performance of the firm to the Board of Directors ​
C)Buy a controlling interest in a firm to exact change ​
D)A & B only​
E)B & C only​

Accepted Answer

Activist investors seek the support of other stockholders to bring about change in a firm, and propose changes to improve the financial performance of the firm to the Board of Directors. They do not necessarily have to buy a controlling interest in a firm to exact change. Therefore, the correct choice is D, which includes both A and B.

Question 5

Activists maintain that they are different from corporate raiders and cause positive changes such as:
A)Increasing the stock price which benefits all stockholders ​
B)Saving the corporation money on executive privileges ​
C)Returning money to shareholders ​
D)All of the above​

Accepted Answer

Activists strive to increase the stock price, save money on executive privileges, and return money to shareholders. Therefore, all of the above are correct.

Question 6

In the 1980s and early 90s corporate raiders purchased stock in some companies and threatened hostile takeovers unless their stock was repurchased at a premium price.

Accepted Answer

This is a true statement. In the 1980s and early 90s, corporate raiders used a tactic called greenmail where they would purchase a large amount of stock in a company and threaten to take over the company unless the company bought back their stock at a higher price. This put pressure on the company to pay a premium to avoid a hostile takeover.

Quiz 17: Corporate Restructuring

In corporations that are said to be widely held, no one investor or group owns 51% or more of the stock.

Activist investors become catalysts for changes aimed at improving financial performance and increasing stock price by:

The biggest criticism of activist investors is that they force companies to return money to shareholders rather than reinvesting it in their businesses. That is likely to hurt those companies and the economy in the long run.

Activist investors:

Activists maintain that they are different from corporate raiders and cause positive changes such as:

In the 1980s and early 90s corporate raiders purchased stock in some companies and threatened hostile takeovers unless their stock was repurchased at a premium price.