Enhancing corporate governance with one-and two-tiered convertible preferred stock
This paper sets out a proposal by which two distinctive and new types of preferred stock (one- and two-tiered convertibles) could be used to sharpen up a company’s governance. Firstly, the framework of analysis for standard preferreds will be outlined, mainly their valuation, underlying incremental cash flows, control rights and contractual features. Secondly, one- and two-tiered convertible preferred are introduced, setting up their financial design, how they convey control rights and contractual characteristics, and giving heed to a simple valuation for those preferreds.