1. Key Terms
Blockholders:
Share holder with large blocks of shares.
Exit Based Mechanism:
Corporate governance mechanism which focus on exit, indicating that share holders no longer
have patience and are willing to exit by selling their shares.
Golden Parachutes:
Large compensation packages to incumbent managers should their firms be taken over.
Junk Bond:
Bonds that are rated below investment grade by the top bond-rating agencies.
Poison Pills:
The rights to either purchase additional shares or sell shares to the bidder at prices
substantially higher than market value.
Voice Based Mechanism:
Corporate governance mechanisms which focus on share holder’s willingness to work with
managers, usually through the board of directors, by “voicing” their concerns.