7. (15 points-5 points each) Principal agent problem In any firm, the balance of power between stockholders and managers is a function of a number of factors - internal as well as external. Events can cause the power to shift towards managers or towards stockholders or leave the balance unchanged. Evaluate how each of the following events would alter the balance of power. You must explain why your answer (write you answer in the box - one sentence is sufficient). 1. Require hostile acquirers to pay stockholders at least a 30% premium over the current stock price in an acquisition. Circle one answer: Increase stockholder power Decrease stockholder power No effect Explanation: 2. The holdings of institutional investors in the firm increases at the expense of small individual investors. Circle one answer XX Management Power increases Stockholder Power increases No effect Explanation: 3. The firm's stock, which is currently followed by no analysts, is added to the list of followed companies at four investment banks. Management Power increases Stockholder Power increases No effect Explanation: 7. (15 points-5 points each) Principal agent problem In any firm, the balance of power between stockholders and managers is a function of a number of factors - internal as well as external. Events can cause the power to shift towards managers or towards stockholders or leave the balance unchanged. Evaluate how each of the following events would alter the balance of power. You must explain why your answer (write you answer in the box - one sentence is sufficient). 1. Require hostile acquirers to pay stockholders at least a 30% premium over the current stock price in an acquisition. Circle one answer: Increase stockholder power Decrease stockholder power No effect Explanation: 2. The holdings of institutional investors in the firm increases at the expense of small individual investors. Circle one answer XX Management Power increases Stockholder Power increases No effect Explanation: 3. The firm's stock, which is currently followed by no analysts, is added to the list of followed companies at four investment banks. Management Power increases Stockholder Power increases No effect Explanation