Question 1

The risk-shifting problem tends to be __________ for __________ firms than for __________ firms.

Accepted Answer

A)  greater; small; large 
B)  greater; large; small 
C)  the same; large; small 
D)  None of the above. 
A)  greater; small; large 
B)  greater; large; small 
C)  the same; large; small 
D)  None of the above. A

Question 2

The financial systems of __________ have major firms working all their external financing through a single bank.

Accepted Answer

A)  Japan and the United Kingdom 
B)  the United States and the United Kingdom 
C)  Germany and the United Kingdom 
D)  Japan and Germany 
A)  Japan and the United Kingdom 
B)  the United States and the United Kingdom 
C)  Germany and the United Kingdom 
D)  Japan and Germany D

Question 3

German banks are able to control a significant number of German firms by

Accepted Answer

A)  making large syndicated loans. 
B)  ownership of shares alone. 
C)  ownership of shares and having proxy voting power over the shares in their custody. 
D)  sheer size in the lending market. 
A)  making large syndicated loans. 
B)  ownership of shares alone. 
C)  ownership of shares and having proxy voting power over the shares in their custody. 
D)  sheer size in the lending market. C

Question 4

Stock options for corporate managers plays a part in handling the conflict between management and __________ in __________-oriented financial systems.

Accepted Answer

A)  bankers; markets 
B)  bankers; banking 
C)  stockholders; markets 
D)  stockholders; banking 
A)  bankers; markets 
B)  bankers; banking 
C)  stockholders; markets 
D)  stockholders; banking

Question 5

"Financial distress" is more easily handled in a __________-oriented financial system, in which ownership of the firm tends to be spread among __________ shareholders than in the other type of system.

Accepted Answer

A)  markets; more 
B)  markets; fewer 
C)  banking; more 
D)  banking; fewer 
A)  markets; more 
B)  markets; fewer 
C)  banking; more 
D)  banking; fewer

Question 6

In privately held firms the manager-stockholder conflict is

Accepted Answer

A)  worse than in the larger firm. 
B)  the same as it is in the larger firm. 
C)  less severe than in the larger firm. 
D)  there is no manager-stockholder conflict because the manager is the owner. 
A)  worse than in the larger firm. 
B)  the same as it is in the larger firm. 
C)  less severe than in the larger firm. 
D)  there is no manager-stockholder conflict because the manager is the owner.

Question 7

The country in which banks are classified as city banks, regional banks, and special purpose financial institutions is

Accepted Answer

A)  the United Kingdom. 
B)  the United States. 
C)  Japan. 
D)  Germany. 
A)  the United Kingdom. 
B)  the United States. 
C)  Japan. 
D)  Germany.

Question 8

The manager-stockholder conflict generally becomes worse

Accepted Answer

A)  the smaller the firm. 
B)  the larger the firm. 
C)  the more the firm borrows from banks. 
D)  the less the firm borrows from banks. 
A)  the smaller the firm. 
B)  the larger the firm. 
C)  the more the firm borrows from banks. 
D)  the less the firm borrows from banks.

Question 9

__________ occurs because firm owners have an incentive to understate their true riskiness to borrow on a more favorable basis.

Accepted Answer

A)  Moral hazard 
B)  Adverse selection 
C)  Manager-stockholder conflict 
D)  Manager-lender conflict 
A)  Moral hazard 
B)  Adverse selection 
C)  Manager-stockholder conflict 
D)  Manager-lender conflict

Question 10

Japan and Germany are two major __________-oriented systems.

Accepted Answer

A)  securities 
B)  equities 
C)  banking 
D)  markets 
A)  securities 
B)  equities 
C)  banking 
D)  markets

Question 11

It is not surprising to see a rather __________ volume of mergers and acquisitions in Japan given its __________-oriented financial system.

Accepted Answer

A)  high; banking 
B)  high; markets 
C)  low; banking 
D)  low; markets 
A)  high; banking 
B)  high; markets 
C)  low; banking 
D)  low; markets

Question 12

The country in which a form of industrial organization in which a group of companies own stock in each other and has a bank that owns stock in each firm is

Accepted Answer

A)  the United Kingdom. 
B)  the United States. 
C)  Japan. 
D)  Germany. 
A)  the United Kingdom. 
B)  the United States. 
C)  Japan. 
D)  Germany.

Question 13

__________ occurs because firms have an incentive to become riskier after their loans are funded.

Accepted Answer

A)  Moral hazard 
B)  Adverse selection 
C)  Manager-stockholder conflict 
D)  Manager-lender conflict 
A)  Moral hazard 
B)  Adverse selection 
C)  Manager-stockholder conflict 
D)  Manager-lender conflict

Question 14

Stocks and bonds issued in banking-oriented systems are rather __________ because they are traded __________.

Accepted Answer

A)  liquid; frequently 
B)  liquid; infrequently if at all 
C)  illiquid; frequently 
D)  illiquid; infrequently if at all 
A)  liquid; frequently 
B)  liquid; infrequently if at all 
C)  illiquid; frequently 
D)  illiquid; infrequently if at all

Question 15

The dominance of banks in Germany comes at the expense of __________ markets there.

Accepted Answer

A)  securities 
B)  government bond 
C)  consumer borrowing 
D)  foreign exchange 
A)  securities 
B)  government bond 
C)  consumer borrowing 
D)  foreign exchange

Question 16

Which of the following banks is similar to a U.S. investment bank?

Accepted Answer

A)  City banks 
B)  Grossbanken 
C)  Merchant banks 
D)  Cooperative banks 
A)  City banks 
B)  Grossbanken 
C)  Merchant banks 
D)  Cooperative banks

Question 17

Because of their __________ liability, corporate stockholders are more concerned with __________.

Accepted Answer

A)  limited; success than failure 
B)  limited; failure than success 
C)  unlimited; success than failure 
D)  unlimited; failure than success 
A)  limited; success than failure 
B)  limited; failure than success 
C)  unlimited; success than failure 
D)  unlimited; failure than success

Question 18

In Germany, banks __________ shares in the large firms they lend to, which __________ lender-stockholder conflict.

Accepted Answer

A)  are not allowed to own; is their way of minimizing 
B)  are not allowed to own; gives rise to 
C)  own a considerable bloc of; is their way of minimizing 
D)  own a considerable bloc of; gives rise to 
A)  are not allowed to own; is their way of minimizing 
B)  are not allowed to own; gives rise to 
C)  own a considerable bloc of; is their way of minimizing 
D)  own a considerable bloc of; gives rise to

Question 19

The United States and __________ are two major markets-oriented systems.

Accepted Answer

A)  Germany 
B)  Japan 
C)  France 
D)  the United Kingdom 
A)  Germany 
B)  Japan 
C)  France 
D)  the United Kingdom

Question 20

The two nations that have gone furthest with "universal banking" are

Accepted Answer

A)  the United States and the United Kingdom. 
B)  the United Kingdom and Germany. 
C)  Germany and Japan. 
D)  the United States and Japan. 
A)  the United States and the United Kingdom. 
B)  the United Kingdom and Germany. 
C)  Germany and Japan. 
D)  the United States and Japan.

Exam 16: Financial System Design

The risk-shifting problem tends to be __________ for __________ firms than for __________ firms.

The financial systems of __________ have major firms working all their external financing through a single bank.

German banks are able to control a significant number of German firms by

Stock options for corporate managers plays a part in handling the conflict between management and __________ in __________-oriented financial systems.

"Financial distress" is more easily handled in a __________-oriented financial system, in which ownership of the firm tends to be spread among __________ shareholders than in the other type of system.

In privately held firms the manager-stockholder conflict is

The country in which banks are classified as city banks, regional banks, and special purpose financial institutions is

The manager-stockholder conflict generally becomes worse

__________ occurs because firm owners have an incentive to understate their true riskiness to borrow on a more favorable basis.

Japan and Germany are two major __________-oriented systems.

It is not surprising to see a rather __________ volume of mergers and acquisitions in Japan given its __________-oriented financial system.

The country in which a form of industrial organization in which a group of companies own stock in each other and has a bank that owns stock in each firm is

__________ occurs because firms have an incentive to become riskier after their loans are funded.

Stocks and bonds issued in banking-oriented systems are rather __________ because they are traded __________.

The dominance of banks in Germany comes at the expense of __________ markets there.

Which of the following banks is similar to a U.S. investment bank?

Because of their __________ liability, corporate stockholders are more concerned with __________.

In Germany, banks __________ shares in the large firms they lend to, which __________ lender-stockholder conflict.

The United States and __________ are two major markets-oriented systems.

The two nations that have gone furthest with "universal banking" are

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters

The risk-shifting problem tends to be for firms than for __ firms.

Stock options for corporate managers plays a part in handling the conflict between management and in -oriented financial systems.

"Financial distress" is more easily handled in a -oriented financial system, in which ownership of the firm tends to be spread among shareholders than in the other type of system.

It is not surprising to see a rather volume of mergers and acquisitions in Japan given its -oriented financial system.

Stocks and bonds issued in banking-oriented systems are rather because they are traded .

Because of their liability, corporate stockholders are more concerned with .

In Germany, banks shares in the large firms they lend to, which lender-stockholder conflict.