Moral hazard and Rights issue: Difference between pages

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1.
A process of issuing new equity shares where they are offered first to existing shareholders in proportion to their existing shareholding.  


A tendency of managers of financial firms to take excessive risks, knowing that their business will be saved by the authorities.
Existing shareholders have, under law in the UK, pre-emption rights.


 
This means that they generally have first refusal on the purchase of any new equity shares.
2.
 
The tendency of some insured individuals or businesses to take excessive risks, that they would not have taken if they had not been insured.
 
 
3.
 
The risk that a party has not entered into a contract in good faith, or has provided misleading information.
 
For example, an insured may attempt to take unfair advantage of an insurer or other guarantor by suppressing information relevant to the assessment of a risk, or by not acting in accordance with the terms of a policy.
 
UK pensions legislation contains a number of clauses specifically designed to reduce the risk of moral hazard.




== See also ==
== See also ==
* [[Agency risk]]
* [[Bonus issue]]
* [[Anti-selection]]
* [[Dividend irrelevancy theory]]
* [[Pension Protection Fund]]
* [[Headroom]]
* [[Initial public offering]]
* [[Nil paid]]
* [[Option premium]]
*[[Placing]]
* [[Pre-emption rights]]
* [[Theoretical ex-rights price]]
* [[Trombone]]


[[Category:Manage_risks]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Risk_frameworks]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Financial_products_and_markets]]

Revision as of 06:53, 23 August 2019

A process of issuing new equity shares where they are offered first to existing shareholders in proportion to their existing shareholding.

Existing shareholders have, under law in the UK, pre-emption rights.

This means that they generally have first refusal on the purchase of any new equity shares.


See also