Question 1

The least costly solution to the conflict of interest problem is simply to monitor the firm's managers closely.

Accepted Answer

A) True 
 B)False

Question 2

Use the table for the question(s) below.
The following are the week-ending stock prices that occurred during the quarter:
  
-Billy,the CEO of Movin On Up Company,was granted stock options with an exercise price of $55.00 per share.Refer to the week-ending stock prices that occured during the quarter.If Movin On Up engaged in the practice of backdating,which of the following is the most likely exercise price for Billy's options?

Accepted Answer

A)  $65.52 
B)  $67.50 
C)  $65.00 
D)  $56.82 
E)  $57.23 
A)  $65.52 
B)  $67.50 
C)  $65.00 
D)  $56.82 
E)  $57.23

Question 3

The Smith family has a 62% stake in A company and A company has a 34% stake in B company.Finally,B company has a 29% stake in C company.What percentage ownership does the Smith family have in C company?

Accepted Answer

A)  21% 
B)  18% 
C)  10% 
D)  29% 
E)  6% 
A)  21% 
B)  18% 
C)  10% 
D)  29% 
E)  6%

Question 4

Having a founder and top executive also be a major shareholder

Accepted Answer

A)  always results in agency conflicts that are bad for minority shareholders. 
B)  can sometimes, as in the case of Google, have benefits that outweigh the costs. 
C)  is illegal in Canada and most other industrialized countries. 
D)  is never beneficial to employees. 
E)  inevitably leads to insider trading. 
A)  always results in agency conflicts that are bad for minority shareholders. 
B)  can sometimes, as in the case of Google, have benefits that outweigh the costs. 
C)  is illegal in Canada and most other industrialized countries. 
D)  is never beneficial to employees. 
E)  inevitably leads to insider trading.

Question 5

What is tunnelling?

Accepted Answer

Tunnelling is a conflict of interest tha

Question 6

Which of the following is an example of an agency problem?

Accepted Answer

A)  managers not working as diligently if they are not the sole owner of the business 
B)  the board of directors firing an incompetent manager 
C)  the manager owning a great deal of stock in the company 
D)  a corporate raider attempting to purchase the company 
E)  managers using cash to increase dividends 
A)  managers not working as diligently if they are not the sole owner of the business 
B)  the board of directors firing an incompetent manager 
C)  the manager owning a great deal of stock in the company 
D)  a corporate raider attempting to purchase the company 
E)  managers using cash to increase dividends

Question 7

________ is a person making a trade based on privileged information.

Accepted Answer

A)  Rogue trading 
B)  Illegal trading 
C)  Standard trading 
D)  Insider trading 
E)  Exchange trading 
A)  Rogue trading 
B)  Illegal trading 
C)  Standard trading 
D)  Insider trading 
E)  Exchange trading

Question 8

Which monitors of a firm,other than the board of directors,become experts in the firm and are in a position to detect irregularities first?

Accepted Answer

A)  securities analysts 
B)  lenders 
C)  employees 
D)  regulators 
E)  shareholders 
A)  securities analysts 
B)  lenders 
C)  employees 
D)  regulators 
E)  shareholders

Question 9

What are some of the negative effects of increasing the sensitivity of managerial pay to firm performance?

Accepted Answer

Increasing the pay-for-performance sensi

Question 10

The most extreme form of direct action that shareholders can take is

Accepted Answer

A)  a resolution. 
B)  to privately approach the board. 
C)  a "no" vote. 
D)  a proxy contest. 
E)  a "say-on-pay" vote. 
A)  a resolution. 
B)  to privately approach the board. 
C)  a "no" vote. 
D)  a proxy contest. 
E)  a "say-on-pay" vote.

Question 11

Describe the main requirements of the Sarbanes-Oxley Act of 2002.

Accepted Answer

1.Strict limits are set on the amount of

Question 12

When the ownership of a corporation is widely held,no one shareholder has the incentive to bear the cost of monitoring the firm's managers.

Accepted Answer

A) True 
 B)False

Question 13

The Smith family has a 55% stake in A company and A company has a 64% stake in B company.Finally,B company has a 51% stake in C company.What percentage ownership does the Smith family have in C company?

Accepted Answer

A)  33% 
B)  28% 
C)  55% 
D)  51% 
E)  18% 
A)  33% 
B)  28% 
C)  55% 
D)  51% 
E)  18%

Question 14

What is the drawback of having more independent directors on the board?

Accepted Answer

In addition to monitoring management,the

Question 15

Activist investors can only achieve their goals by putting their issues to a shareholder vote.

Accepted Answer

A) True 
 B)False

Question 16

What is the role of takeovers in corporate governance?

Accepted Answer

When internal governance systems such as

Question 17

Academic studies have shown that greater managerial ownership is associated with greater value-reducing actions by managers.

Accepted Answer

A) True 
 B)False

Question 18

Directors who are employees,former employees,or family members of employees are called

Accepted Answer

A)  managing directors. 
B)  independent directors. 
C)  inside directors. 
D)  grey directors. 
E)  unelected directors. 
A)  managing directors. 
B)  independent directors. 
C)  inside directors. 
D)  grey directors. 
E)  unelected directors.

Question 19

What is a captured board?

Accepted Answer

A captured board is a board of

Question 20

Describe the "stakeholder" model of corporate governance.

Accepted Answer

The agency costs and the ways to control

Exam 25: Corporate Governance

The least costly solution to the conflict of interest problem is simply to monitor the firm's managers closely.

The Smith family has a 62% stake in A company and A company has a 34% stake in B company.Finally,B company has a 29% stake in C company.What percentage ownership does the Smith family have in C company?

Having a founder and top executive also be a major shareholder

What is tunnelling?

Which of the following is an example of an agency problem?

________ is a person making a trade based on privileged information.

Which monitors of a firm,other than the board of directors,become experts in the firm and are in a position to detect irregularities first?

What are some of the negative effects of increasing the sensitivity of managerial pay to firm performance?

The most extreme form of direct action that shareholders can take is

Describe the main requirements of the Sarbanes-Oxley Act of 2002.

When the ownership of a corporation is widely held,no one shareholder has the incentive to bear the cost of monitoring the firm's managers.

The Smith family has a 55% stake in A company and A company has a 64% stake in B company.Finally,B company has a 51% stake in C company.What percentage ownership does the Smith family have in C company?

What is the drawback of having more independent directors on the board?

Activist investors can only achieve their goals by putting their issues to a shareholder vote.

What is the role of takeovers in corporate governance?

Academic studies have shown that greater managerial ownership is associated with greater value-reducing actions by managers.

Directors who are employees,former employees,or family members of employees are called

What is a captured board?

Describe the "stakeholder" model of corporate governance.

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Filters