Use of LBOs to Achieve Corporate Control
Barriers to the Market for Corporate Control
Globalization of Stock Markets
Privatization
Emerging Stock Markets
Variation in Characteristics Among Stock Markets
Methods Used to Invest in Foreign Stocks
Key Concepts
1. Explain the role of venture capital funds and private equity funds provide equity financing to firms.
2. Describe the process of an engaging in an initial public offering.
3. Describe the process of engaging in a secondary offering.
4. Explain how firms are monitored within the stock market.
POINT/COUNTER-POINT:
Should a Stock Exchange Enforce Some Governance Standards on the Firms
Listed on the Exchange?
POINT: No. Governance is the responsibility of the firms, not the stock exchange. The stock exchange
should simply ensure that the trading rules of the exchange are enforced and should not intervene in the
firms’ governance issues.
COUNTER-POINT: Yes. By enforcing governance standards such as requiring a listed firm to have a
majority of outside members on its board of directors, a stock exchange can enhance its own credibility.
WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own
opinion.
ANSWER: An exchange and the listed firms can be viewed as more credible if there are governance
standards. However, the credibility of an exchange is questionable if it cannot properly monitor itself
properly (as was the case for the NYSE when the board allowed some excessive compensation to
executives who managed the exchange).