Chapter 28, Problem 1P

What are the two primary mechanisms under which ownership and control of a public corporation can change?

Summary Introduction

To describe: The two primary reasons under which ownership and control of a public corporation can change.

Explanation of Solution

The majority shares of a public corporation can be acquired by individuals or by another company. They can subsequently replace the chief executive and other senior managers. This is one way the ownership and control of a public corporation can change.

Another way the ownership and control can change is that the target company can get merged with the acquiring company after acquisition of majority shares of the target company. The target company will cease to exist and the ownership and control will rest now with the acquiring company.

Therefore, the above are two ways in which the ownership and control of a public corporation can change.