Suppose a firm needs fresh capital,but its management does not want to give up its controlling interest.The existing shares could be labeled Class A,and then Class B shares with limited voting rights could be issued to outside investors.

Question

Quizplus · Accepted Answer

This is a common strategy for firms to raise capital while maintaining control over the company. The Class B shares would typically have fewer voting rights than the Class A shares, allowing the existing management to retain control of important decisions.

Suppose a Firm Needs Fresh Capital,but Its Management Does Not