MNCs tend to expand more when they can more easily access funds by issuing stock. In...

MNCs tend to expand more when they can more easily access funds by issuing stock. In some countries, shareholders rights are very limited, and the MNCs have limited ability to raise funds by issuing stock. Explain why access to funding is more severe for MNCs based in countries where shareholder rights are limited. You are encouraged to support your discussion/argument with real-world corporate case(s).

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Expert Solution

In some countries, shareholders rights are very limited and there will not be sufficient laws to protect their rights. In such countries, the shareholders will be concerned about the agency problems that may occur between the managers and shareholders. Then MNCs will find it difficult to raise funds by issuing stock. The public will subscribe the stock only if they have rights which enable them to force the managers of the company to serve shareholder interests.

Investors prefer to invest in the countries where there are laws that grant shareholders rights. Then they can exercise their ownership functions effectively. Thus the investors will invest their money in the countries where there are laws to protect shareholder rights.

jeff jeffy answered 2 years ago

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