Corporate IssuersModule 2 of 7

Investors and Other Stakeholders

Concepts

Formulas

Decisions

Quiz Questions

Key Concepts

5 concepts covered in this module.

Debt vs Equity Claims

Debt: fixed claims, priority in liquidation, limited upside. Equity: residual claims, last in liquidation, unlimited upside.

Shareholder-Creditor Conflict

Shareholders benefit from higher risk (upside). Creditors prefer lower risk (protect fixed claims). Asset substitution problem.

Stakeholder Theory

Company should consider all stakeholders: shareholders, creditors, employees, customers, suppliers, government, communities.

ESG Considerations

Environmental (climate, pollution), Social (labor, diversity), Governance (board, executive pay). Increasingly material to investment decisions.

Agency Problem

Conflict between principals (shareholders) and agents (managers). Managers may pursue self-interest over shareholder wealth maximization.

Decision Frameworks

1 decision frameworks to guide your analysis.

Shareholder vs Stakeholder approach?

Shareholder: maximize firm value for owners (traditional)
Stakeholder: consider all parties, sustainable long-term value

Mind Map

Visual overview of how concepts connect in this module.

Investors & Stakeholders

Debt vs Equity

Priority of claims

Fixed vs residual

Risk preferences

Conflicts

Stakeholders

Shareholders

Creditors

Employees

Customers

Suppliers

Government

ESG

Environmental

Social

Governance

Material risks

Integration approaches

Agency Issues

Principal-agent conflict

Information asymmetry

Moral hazard

Monitoring costs

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Flashcard

Debt vs Equity Claims

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Answer

Debt: fixed claims, priority in liquidation, limited upside. Equity: residual claims, last in liquidation, unlimited upside.

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Organizational Forms, Corporate Issuer Features, and Ownership

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Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits