If a firm's stockholders are given the preemptive right,then they can call for a meeting to vote to replace the management.Without the preemptive right,dissident stockholders must seek a change in management through a proxy fight.

Question

Quizplus · Accepted Answer

The statement is incorrect. The preemptive right relates to the ability of existing shareholders to maintain their proportionate ownership in the company by subscribing to new shares before they are offered to the general public. It has nothing to do with the ability to call for a meeting to vote on replacing management. Dissident stockholders can still call for a meeting and seek a change in management through a proxy fight, regardless of whether or not there is a preemptive right.

If a Firm's Stockholders Are Given the Preemptive Right,then They