The preemptive right is important to shareholders because it
A) Allows management to sell additional shares below the current market price.
B) Protects the current shareholders against dilution of ownership interests.
C) Is included in every corporate charter.
D) Will result in higher dividends per share.
E) The preemptive right is not important to shareholders.

Question

Quizplus · Accepted Answer

The preemptive right allows current shareholders to maintain their proportionate ownership in the company when new shares are issued. Without this right, the ownership interests of existing shareholders would be diluted. Therefore, the preemptive right is important for protecting the interests of current shareholders.

The Preemptive Right Is Important to Shareholders Because It