Copyright?2023PearsonEducation,Inc.

MultinationalBusinessFinance,16e(Eiteman/Stonehill/Moffett)

Chapter4FinancialGoals,CorporateGovernance, andtheMarketforCorporateControl

4.1BusinessOwnership

1)Foreignstockmarketsarefrequentlycharacterizedbycontrollingshareholdersfortheindividualpubliclytradedfirms.WhichofthefollowingisNOTidentifiedbytheauthorsastypicalcontrollingshareholders?

A)thegovernment(forexample,privatizedutilities)

B)institutions(suchasbanksinGermany)

C)family(suchasinFrance)

D)Alloftheabovewereidentifiedbytheauthorsascontrollingshareholders.

Answer:D

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

2)WhichofthefollowingisNOTtypicallyassociatedwiththepublicownershipofbusinessorganizations?

A)thestate

B)thegovernment

C)families

D)civilsociety

Answer:C

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

3)WhichofthefollowingisNOTtypicallyassociatedwiththeprivateownershipofbusinessorganizations?

A)thegovernment

B)families

C)individuals

D)publiclytraded,widely-heldorganizations

Answer:A

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

4)StateOwnedEnterprises(SOEs):

A)areaformofpublicownership.

B)arecreatedforcommercialactivitiesratherthancivilorsocialactivities.

C)arethedominantformofbusinessorganizationinsomecountries.

D)arealloftheabove.

Answer:D

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

5)Theproblemsthatmayariseduetotheseparationofownershipandmanagementinlargebusinessorganizationsareknownas:

A)separationanxiety.

B)theagencyproblem.

C)corporatedisconnecttheory.

D)noneoftheabove

Answer:B

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

6)Privatizationisatermusedtodescribe:

A)firmsthatarepurchasedbythegovernment.

B)governmentoperationsthatarepurchasedbycorporationsandotherinvestors.

C)firmsthatdonotusepubliclyavailabledebt.

D)non-publicmeetingsheldbymembersofinterlockingdirectorates.

Answer:B

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

7)Whenownersofacompanywishtosellaportionoftheirownershipinthebusinessinthecapitalmarketsbylistingandtradingthecompany'ssharesonastockexchange,thesharesarethensaidtobe:

A)publiclytraded.

B)privatelyheld.

C)aprivateenterprise.

D)apublicenterprise.

Answer:A

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

8)WhichofthefollowingareNOTimplicationsofaninitialsaleofsharestothepublic?

A)Thefirmmustdiscloseasizabledegreeoffinancialandoperationaldetails.

B)Publishfinancialinformationquarterly.

C)ComplywithrulesandregulationsoftheSEC.

D)Alloftheaboveareimplicationsofaninitialsalesofsharestothepublic.

Answer:D

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

9)PolyProductionInc.hastwoclassesofcommonstock.ClassAhas5millionshareswith10votespershare.ClassBhas5millionshareswith1votepershare.IfthedividendspershareareequalforbothclassAandBstock,thenClassAshareholdershave________ofthevotesand________ofthedividends.

A)90.91%;90.91%

B)90.91%;50.00%

C)50.00%;50.00%

D)83.33%;33.33%

Answer:B

Diff:3

L.O.:4.1BusinessOwnership

Skill:Analytical

AACSB:Analyticalthinking

10)IntheU.S.andU.K.,stockmarketsarecharacterizedbyownershipoffirmsconcentratedinthehandsofafewcontrollingshareholders.Incontrast,therestoftheworldtendstohavemorewidespreadownershipofshares.

Answer:FALSE

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

11)StateOwnedEnterprises(SOEs)bytheirverynamecannotbetradedonstockexchangesbecausetheyaregovernmentowned.

Answer:FALSE

Diff:1

L.O.:4.1BusinessOwnership

Skill:Conceptual

AACSB:Applicationofknowledge

12)Accordingtorecentresearch,family-ownedfirmsinsomehighly-developedeconomiestypicallyoutperformpublicly-ownedfirms.

Answer:TRUE

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

13)Accordingtotheauthors,dualclassesofvotingstockarethenorminsomenon-Anglo-Americanmarkets.

Answer:TRUE

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

14)Non-Anglo-Americanmarketsaredominatedbythe"one-vote-one-share"rule.

Answer:FALSE

Diff:1

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

15)Arecentstudyshowsthatprivatelyheldfirmsuselessfinancialleverageandenjoylowercostsofdebtthanpubliclytradedfirms.

Answer:TRUE

Diff:2

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

16)AcompanycouldNOTbeapartiallystate-ownedenterpriseandpubliclytradedatthesametime.

Answer:FALSE

Diff:2

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

17)ApubliclytradedfirmCANNOTbecontrolledbyasingleinvestor.

Answer:FALSE

Diff:2

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

18)TheLatinAmericanmarketsareNOTcharacterizedbywidespreadownershipofshareswithoutcontrollingshareholders.

Answer:TRUE

Diff:2

L.O.:4.1BusinessOwnership

Skill:Recognition

AACSB:Applicationofknowledge

19)Oneofthemostchallengingissuesinthefinancialmanagementoftheenterpriseisthepossibleseparationofownershipfrommanagementresultingintheso-calledprincipalagentproblem.Definetheagencyproblem,explainpossiblewaystoalleviatetheagencyproblemanddiscussdifferencesinacrossglobalmarkets.

Answer:Theseparationofownershipfrommanagementraisesthepossibilitythatthetwoentitiesmayhavedifferentbusinessandfinancialobjectives.Thisistheso-calledprincipalagentproblem.Thereareseveralstrategiesforaligningshareholderandmanagementinterests,themostcommonofwhichisforseniormanagementtoownsharesorshareoptions.Whatisthengoodforthemanagers'ownpersonalwealthissimilartothatofgeneralshareholders.

TheUnitedStatesandUnitedKingdomaretwocountrymarketscharacterizedbywide-spreadownershipofshares.Managementmayownsomesmallportionofstockintheirfirms,butlargelymanagementisahiredagentthatisexpectedtorepresenttheinterestsofshareholders.Incontrast,manyfirmsinmanyotherglobalmarketsarecharacterizedbycontrollingshareholderssuchasgovernment,institutions(e.g.,banksinGermany),family(e.g.,inFrance,Italy,andthroughoutAsiaandLatinAmerica),andconsortiumsofinterests(e.g.,keiretsusinJapanandchaebolsinSouthKorea).Abusinessthatisownedandmanagedbythesameentitydoesnotsuffertheagencyproblem.

Diff:1

L.O.:4.1BusinessOwnership

Skill:Conceptual

AACSB:Applicationofknowledge

20)Whatarethemostimportantdistinctionsthatmakestateownedenterprises(SOEs)differentfromotherformsofgovernmentorganizations?

Answer:Stateownedenterprisesarecreateddistinctlyforthepurposeofcommercialactivities,ratherthanthemultitudeofothersocial,civil,andregulatoryactivitiesofgovernment.SOEsaretoday,inmanycountries,thedominantformofbusinessentity.

Diff:2

L.O.:4.1BusinessOwnership

Skill:Conceptual

AACSB:Applicationofknowledge

4.2TheCorporateObjective

1)"Maximizecorporatewealth":

A)istheprimaryobjectiveofthenon-Anglo-Americanmodelofmanagement.

B)asamanagementobjectivetreatsshareholdersonaparwithothercorporatestakeholderssuchascreditors,labor,andlocalcommunity.

C)hasabroaderdefinitionthanjustfinancialwealth.

D)alloftheabove

Answer:D

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

2)TheShareholderWealthMaximizationModel(SWM):

A)combinestheinterestsandinputsofshareholders,creditors,management,employees,andsociety.

B)isbeingusurpedbytheStakeholderCapitalismModelasthosetypesofMNEsdominatetheirglobalindustrysegments.

C)clearlyplacesshareholdersastheprimarystakeholder.

D)isthedominantformofcorporatemanagementintheEuropean-Japanesegovernancesystem.

Answer:C

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

3)TheStakeholderCapitalismModel(SCM):

A)clearlyplacesshareholdersastheprimarystakeholder.

B)combinestheinterestsandinputsofshareholders,creditors,management,employees,andsociety.

C)hasfinancialprofitasitsgoalandisoftentermedimpatientcapital.

D)istheAnglo-Americanmodelofcorporategovernance.

Answer:B

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

4)IntheAnglo-Americanmodelofcorporategovernance,theprimarygoalofmanagementisto:

A)maximizethewealthofallstakeholders.

B)maximizeshareholderwealth.

C)minimizecosts.

D)minimizerisk.

Answer:B

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

5)Infinance,anefficientmarketisoneinwhich:

A)pricesareassumedtobecorrect.

B)pricesadjustquicklyandaccuratelytonewinformation.

C)pricesarethebestallocatorsofcapitalinthemacroeconomy.

D)alloftheabove

Answer:D

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

6)Systematicriskcanbedefinedas:

A)thetotalrisktothefirm.

B)theriskoftheindividualsecurity.

C)theriskofthemarketingeneral.

D)theriskthatcanbesystematicallydiversifiedaway.

Answer:C

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

7)Unsystematicriskcanbedefinedas:

A)thetotalrisktothefirm.

B)theriskoftheindividualsecurity.

C)theaddedriskthatafirm'ssharesbringtoadiversifiedportfolio.

D)theriskofthemarketingeneral.

Answer:B

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

8)Thestudyofhowshareholderscanmotivatemanagementtoaccepttheprescriptionsoftheshareholderwealthmaximizationmodeliscalled:

A)marketefficiency.

B)theSWMmodel.

C)agencytheory.

D)theSCMmodel.

Answer:C

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

9)UndertheShareholderWealthMaximizationModel(SWM)ofcorporategovernance,poorfirmperformanceislikelytobefacedwithallbutwhichofthefollowing?

A)saleofsharesbydisgruntledcurrentshareholders

B)shareholderactivismtoattemptachangeincurrentmanagement

C)asamaximumthreat,initiationofacorporatetakeover

D)prisontimeforexecutivemanagement

Answer:D

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

10)WhichofthefollowingisareasonwhymanagersacttomaximizeshareholderwealthinAnglo-Americanmarkets?

A)theuseofstockoptionstoalignthegoalsofshareholdersandmanagers

B)themarketforcorporatecontrolthatallowsforoutsidetakeoverofthefirm

C)performance-basedcompensationforexecutivemanagement

D)alloftheabove

Answer:D

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

11)WhichofthefollowingisNOTtrueregardingthestakeholdercapitalismmodel?

A)Banksandotherfinancialinstitutionsarelessimportantcreditorsthansecuritiesmarkets.

B)LaborunionsaremorepowerfulthanintheAnglo-Americanmarkets.

C)Governmentsinterferemoreinthemarketplacetoprotectimportantstakeholdergroups.

D)AlloftheaboveareTRUE.

Answer:A

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

12)Thestakeholdercapitalismmodel:

A)typicallyavoidstheflawofimpatientcapital.

B)triestomeetthedesiresofmultiplestakeholders.

C)mayleavemanagementwithoutaclearsignalabouttradeoffsamongtheseveralstakeholders.

D)alloftheabove

Answer:D

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

13)WhichofthefollowingisgenerallyNOTconsideredtobeaviableoperationalgoalforafirm?

A)maintainingastronglocalcurrency

B)maximizationofafter-taxincome

C)minimizationofthefirm'seffectiveglobaltaxburden

D)correctpositioningofthefirm'sincome,cashflowsandavailablefundsastocountryandcurrency

Answer:A

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

14)Whichofthefollowingoperationalgoalsfortheinternationalfirmmaybeincompatiblewiththeothers?

A)maintainingacorrectglobalpositioning

B)maximizationofafter-taxincome

C)minimizationofthefirm'seffectiveglobaltaxburden

D)Eachofthesegoalsmaybeincompatiblewithoneormoreoftheothers.

Answer:D

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

15)Theprimaryoperationalgoalforthefirmisto:

A)maximizeafter-taxprofitsineachcountrywherethefirmisoperating.

B)minimizethetotalfinancialrisktothefirm.

C)maximizetheconsolidatedafter-taxprofitsofthefirm.

D)maximizethetotalrisktothefirm.

Answer:C

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

16)Withshareholderwealthmaximizationasthemanager'sgoal,capitalmaybetermed:

A)impatient.

B)patient.

C)borrowed.

D)bought.

Answer:A

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

17)Ifsharepricerisesfrom$12to$15pershare,andpaysadividendof$1pershare,whatwastherateofreturntoshareholders?

A)26.67%

B)-13.33%

C)33.33%

D)16.67%

Answer:C

Diff:3

L.O.:4.2TheCorporateObjective

Skill:Analytical

AACSB:Analyticalthinking

18)Inrecentyearsthetrendhasbeenformarketstoincreasefocusontheshareholderwealthformofwealthmaximization.

Answer:TRUE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

19)Thestakeholdercapitalismmodel(SCM)holdsthattotalrisk(operationalandfinancial)ismoreimportantthanjustsystematicrisk.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

20)Inrecentyearsthetrendhasbeenformarketstoincreasefocusonstakeholders.

Answer:TRUE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

21)PatientCapitalismischaracterizedbyshort-termfocusbybothmanagementandinvestors.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

22)Agencytheorystatesthatunsystematicriskcanbeeliminatedthroughdiversification.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

23)Thestakeholdercapitalismmodeldoesnotassumethatequitymarketsareeitherefficientorinefficient.

Answer:TRUE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

24)Thestakeholdercapitalismmodelassumesthatonlysystematicrisk"counts"orisaprimeconcernformanagement.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

25)Dividendyieldisthechangeinthesharepriceofstockastradedinthepublicequitymarkets.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

26)Thegoalofallinternationalcorporationsistomaximizeshareholderwealth.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

27)Systematicriskcanbeeliminatedthroughportfoliodiversification.

Answer:FALSE

Diff:1

L.O.:4.2TheCorporateObjective

Skill:Recognition

AACSB:Applicationofknowledge

28)Inthestakeholdercapitalismmodel(SCM)theassumptionofmarketefficiencyisabsolutelycritical.

Answer:FALSE

Diff:2

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

29)Describethemanagementobjectivesofafirmgovernedbytheshareholderwealthmaximizationmodelandonegovernedbythestakeholderwealthmaximizationmodel.Giveanexampleofhowthesetwomodelsmayleadtodifferentdecision-makingbyexecutivemanagement.

Answer:Shareholderwealthmaximizationattemptstodojustthat,typicallythroughthemaximizationofshareprice.Stakeholderwealthmaximizationismuchmoredifficultbecauseofthenecessitytosatisfymanystakeholdersallhavingapproximatelyequalclaimontheobjectivesofmanagement.Thesestakeholdersmayincludeshareholders,creditors,customers,employees,andcommunity.Differingdecisionsmayoccurinasituationthatinvolvessignificantsocialcosts.Forexample,intheU.S.thedecisiontoshiftproductionfromalocalfactorytoaforeignonemaybeinlargebasedonthechangeinNPVastheresultofthemovewithonlyminorconsiderationoftheimpactthatachangeinlocationwouldhaveonthecommunityatlargeorthelocalemployees.AmanagerofastakeholderdrivenfirmmayplaceequalorgreateremphasisonthelocalemployeesandcommunityandchoosetomaintainthecurrentfacilityratherthanmoveeveniftheforeignoperationprovidedamuchgreaterNPV.Ultimately,thelattermaycauseaninefficientallocationofscarceresourcesandleadtoanoveralllowerstandardofliving.

Diff:3

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

30)Definepatientandimpatientcapitalismanddiscusshoweachmayleadtodifferentdecisionmakingintheshareholderwealthmaximizationmodel.

Answer:Patientcapitalismmaybedefinedasafocusonlong-termshareholderwealthmaximizationandisoftenassociatedwithmanagementfocusingonlong-terminvestmentswithlessemphasisplacedonshort-termortrendyobjectives.Ontheotherhand,impatientcapitalismcouldbedescribedasadestructivefocusontheshorttermbybothmanagementandinvestors.Thesedifferencesinthetimehorizoncouldleadtodifferentandperhapsinferiordecisionsbyexistingmanagementandultimatelybecostlytotheshareholders.

Diff:3

L.O.:4.2TheCorporateObjective

Skill:Conceptual

AACSB:Applicationofknowledge

4.3CorporateGovernance

1)WhichofthefollowingbroadtopicsisNOTidentifiedasanareatobeestablishedasgoodcorporategovernancepracticebytheOrganizationforEconomicCooperationandDevelopment(OECD)?

A)protecttherightsofshareholders

B)disclosureandtransparency

C)theproperroleofstakeholdersinthegovernanceofthefirm

D)Alloftheaboveshouldbeaconcernofgoodcorporategovernance.

Answer:D

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

2)Therelationshipamongstakeholdersusedtodetermineandcontrolthestrategicdirectionandperformanceofanorganizationistermed:

A)corporategovernance.

B)Anglo-Americanactivism.

C)capitalstructure.

D)workingcapitalmanagement.

Answer:A

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

3)Whendiscussingthestructureofcorporategovernance,theauthorsdistinguishbetweeninternalandexternalfactors.________is/areanexampleofaninternalfactor,and________is/areanexampleofanexternalfactor.

A)Equitymarkets;executivemanagement

B)Debtmarkets;boardofdirectors

C)Executivemanagement;auditors

D)Auditors;regulators

Answer:C

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

4)WhichofthefollowingisNOTcommonlyassociatedwithagovernmentaffiliatedformofcorporategovernanceregime?

A)nominorityinfluence

B)lackoftransparency

C)stateownershipofenterprise

D)Allareassociatedwiththistypeofcorporategovernanceregime.

Answer:D

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

5)Generallyspeaking,whichofthefollowingisNOTconsideredanimportantfactorinthecompositionandcontrolofcorporateboardsofdirectors?

A)thenumberofinsidervs.outsidedirectors

B)thetotalnumberofdirectorsontheboard

C)thecompositionofthecompensationcommittee

D)Alloftheaboveareimportantfactorsofboardcomposition.

Answer:D

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

6)Anglo-Americanmarketsisatermusedtodescribebusinessmarketsin:

A)North,Central,andSouthAmerica.

B)theUnitedStates,Canada,andWesternEurope.

C)theUnitedStates,UnitedKingdom,Canada,AustraliaandNewZealand.

D)theUnitedStates,France,Britain,andGermany.

Answer:C

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

7)ThedeliberationoftheprocessdemonstratedintheEuropean-Japanesesystemofcorporategovernancehassometimesbeentermed:

A)socialism.

B)impatientcapital.

C)patientcapital.

D)communism.

Answer:C

Diff:1

L.O.:4.3CorporateGovernance

Skill:Conceptual

AACSB:Applicationofknowledge

8)WhichofthefollowingisNOTanimportantconceptwhendistinguishingbetweeninternationalanddomesticfinancialmanagement?

A)corporategovernance

B)culture,history,andinstitutions

C)politicalrisk

D)Alloftheaboveareimportantdistinguishingconcepts.

Answer:D

Diff:2

L.O.:4.3CorporateGovernance

Skill:Conceptual

AACSB:Applicationofknowledge

9)TheBoardofDirectors:

A)consistsexclusivelyoftheofficersofthecorporation.

B)isthelegalbodywhichisaccountableforthegovernanceofthecorporation.

C)isnotsubjecttotheexternalforcesofthemarketplace.

D)isappointedbytheSecuritiesandExchangeCommission(SEC).

Answer:B

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

10)WhichofthefollowingisNOTapossibleandappropriateresponsebyshareholdersdissatisfiedwithexistingfirmmanagementofapubliclytradedfirm?

A)Shareholderscouldselltheirsharesofstock.

B)Shareholderscouldremainquietlydisgruntled.

C)Shareholders,perhapswiththehelpofothers,couldattempttoinitiateatakeover.

D)Alloftheseresponsesmaybepossibleandappropriate.

Answer:D

Diff:2

L.O.:4.3CorporateGovernance

Skill:Conceptual

AACSB:Applicationofknowledge

11)CorporategovernanceregimesareafunctionofthefollowingfactorsEXCEPT:

A)exchangerateregimes.

B)financialmarketdevelopment.

C)disclosureandtransparency.

D)developmentofthelegalsystem.

Answer:A

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

12)Insidercorporategovernanceregimesarecharacterizedby:

A)concentratedshareownership.

B)commonhostiletakeovers.

C)growingproportionofoutsidedirectors.

D)littleminorityshareholderprotection.

Answer:A

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

13)Regardingcomparativecorporategovernanceregimes:Bank-basedregimescharacterizedbygovernmentinfluenceinbanklendingandalackoftransparencyisoftenfoundincountriessuchasKoreaandGermany.

Answer:TRUE

Diff:2

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

14)Investorprotectionistypicallybetterincountrieswithcodifiedcivillaw(theCodeNapoleon)thanincountrieswithalegalsystembasedinEnglishcommonlaw.

Answer:FALSE

Diff:2

L.O.:4.3CorporateGovernance

Skill:Conceptual

AACSB:Applicationofknowledge

15)Incountrieswithweakinvestorprotection,controllingshareholderownershipisoftenasubstituteforalackoflegalprotection.

Answer:TRUE

Diff:1

L.O.:4.3CorporateGovernance

Skill:Recognition

AACSB:Applicationofknowledge

16)HavingAnglo-Americansasmembersoftheboardofdirectorsofanon-Anglo-Americanfirmsignalspoorcorporategovernanceinthefirm.

Answer:FALSE

Diff:1

L.O.:4.3CorporateGovernance

Skill:Conceptual

AACSB:Applicationofknowledge

17)Althoughtherearemanydifferentculturalandlegalapproachesusedincorporategovernanceworldwide,thereisagrowingconsensusonwhatconstitutesgoodcorporategovernance.Listandexplainatleastthreestandardizedcommonprinciplesofgoodcorporategovernance.

Answer:1)Aboardofdirectorsthathasbothinternalandexternalmembers.Moreimportantly,itshouldbestaffedbyindividualsoftrueexperienceandknowledgeofnotonlytheirownrulesandresponsibilities,butofthenatureandconductofthecorporatebusiness.2)Amanagementcompensationsystemthatisalignedwithcorporateperformance(financialandotherwise)