Which of these is true of blockholders?

Question

Quizplus · Accepted Answer

Blockholders participate more than small shareholders in the governance process because they internalize more of the benefits. This is because they hold a significant percentage of the voting shares, which gives them more control over the decision-making process of the corporation.

Answer: D
 Blockholders should not be the managers of the firm. This is because they have a conflict of interest, as they may prioritize their personal interests over the interests of the company and other shareholders. This can lead to agency problems and a decrease in the overall value of the corporation.

B and C are incorrect choices because they are not true statements about blockholders. Blockholders adding value by extracting private benefits is a violation of the fiduciary responsibility, and institutional investors are often more effective in reducing agency costs due to their large size, diversity, and professional expertise.

Which of These Is True of Blockholders