Uploaded February 2025 | Updated September 2026, 1 week ago
In this session, we spent almost a large chunk of out time on the assessment of where the power lies in a company. In the utopian world, the power lies entirely with shareholders, but in the real world, that is not often the case. It can lie with managers, if shareholdings are diffuse and shareholders are passive. It can lie with a subset of inside shareholders, who have large holdings and/or are part of incumbent management. In some cases, that power can come from having voting and non-voting shares. It can lie with governments, lenders or employees. The first step in understanding why a company does what it does is to assess the power structure, and I suggested that you look at the largest shareholders in the company. Check out the percent of shares held by insiders (includes founders, managers and individuals owning more than 5%) and by institutions. We also looked at why bondholders who choose to not protect themselves are exposed, and market inefficiencies and "short termism".
Slides: nyu.box.com/s/8ntguvst601pnc3ev2sfd2z006w2ga1t
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session3atest.pdf
https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session3asoln.pdf
In this session, we spent almost a large chunk of out time on the assessment of where the power lies in a company. In the utopian world, the power lies entirely with shareholders, but in the real world, that is not often the case. It can lie with managers, if shareholdings are diffuse and shareholders are passive. It can lie with a subset of inside shareholders, who have large holdings and/or are part of incumbent management. In some cases, that power can come from having voting and non-voting shares. It can lie with governments, lenders or employees. The first step in understanding why a company does what it does is to assess the power structure, and I suggested that you look at the largest shareholders in the company. Check out the percent of shares held by insiders (includes founders, managers and individuals owning more than 5%) and by institutions. We also looked at why bondholders who choose to not protect themselves are exposed, and market inefficiencies and "short termism".
Slides: nyu.box.com/s/8ntguvst601pnc3ev2sfd2z006w2ga1t
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session3atest.pdf
https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session3asoln.pdf
