Question 1

Managers may inappropriately use the residual control rights:

Accepted Answer

A)  to pay themselves exorbitant perquisites. 
B)  not to divert assets through transfer pricing. 
C)  to take on unprofitable projects. 
D)  to invest in positive NPV projects. 
A)  to pay themselves exorbitant perquisites. 
B)  not to divert assets through transfer pricing. 
C)  to take on unprofitable projects. 
D)  to invest in positive NPV projects. C

Question 2

Private benefits of corporate control will tend to be higher in:

Accepted Answer

A)  in French civil law countries than in English common law countries. 
B)  in English common law countries than in French civil law countries. 
C)  in French civil law countries than in Scandinavian civil law countries. 
D)  In English common law countries than in German civil law countries. 
A)  in French civil law countries than in English common law countries. 
B)  in English common law countries than in French civil law countries. 
C)  in French civil law countries than in Scandinavian civil law countries. 
D)  In English common law countries than in German civil law countries. A

Question 3

Corporate governance can be defined as:

Accepted Answer

A)  the government-imposed rules and regulations affecting corporate management. 
B)  the general framework in which company management is selected and monitored. 
C)  the rules and regulations adopted by boards of directors specifying how to manage companies. 
D)  the economic, legal, and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers and other stakeholders of the company. 
A)  the government-imposed rules and regulations affecting corporate management. 
B)  the general framework in which company management is selected and monitored. 
C)  the rules and regulations adopted by boards of directors specifying how to manage companies. 
D)  the economic, legal, and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers and other stakeholders of the company. D

Question 4

Discuss the concept of "private benefits of corporate control".

Accepted Answer

Private benefits of corporate control ma

Question 5

Agency problems may be alleviated by:

Accepted Answer

A)  incentive contracts. 
B)  debt. 
C)  market for corporate control. 
D)  All of these. 
A)  incentive contracts. 
B)  debt. 
C)  market for corporate control. 
D)  All of these.

Question 6

Corporate governance reform requires all of the following except:

Accepted Answer

A)  increasing the decision making power of managers. 
B)  strengthening the independence of boards of directors with more outsiders. 
C)  enhancing the transparency and disclosure standard of financial statements. 
D)  energizing the regulatory and monitoring functions of securities commissions. 
A)  increasing the decision making power of managers. 
B)  strengthening the independence of boards of directors with more outsiders. 
C)  enhancing the transparency and disclosure standard of financial statements. 
D)  energizing the regulatory and monitoring functions of securities commissions.

Question 7

Suppose Mr.Lee and his relatives hold 30% of shares outstanding of Samsung Life,which in turn holds 20% of Samsung Electronics.What is the cash flow right of the Lee family in Samsung Electronics?

Accepted Answer

A)  50%. 
B)  10%. 
C)  20%. 
D)  6%. 
A)  50%. 
B)  10%. 
C)  20%. 
D)  6%.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  When professional managers have large equity positions of their own in a company with diffused ownership, they have both the power and a motive to engage in self-dealings. 
B)  When professional managers have small equity positions of their own in a company with concentrated ownership, they have both the power and a motive to engage in self-dealings. 
C)  When professional managers have small equity positions of their own in a company with diffused ownership, they have both the power and a motive to engage in self-dealings. 
D)  When professional managers have large equity positions of their own in a company with concentrated ownership, they have both the power and a motive to engage in self-dealings. 
A)  When professional managers have large equity positions of their own in a company with diffused ownership, they have both the power and a motive to engage in self-dealings. 
B)  When professional managers have small equity positions of their own in a company with concentrated ownership, they have both the power and a motive to engage in self-dealings. 
C)  When professional managers have small equity positions of their own in a company with diffused ownership, they have both the power and a motive to engage in self-dealings. 
D)  When professional managers have large equity positions of their own in a company with concentrated ownership, they have both the power and a motive to engage in self-dealings.

Question 9

How can listing overseas benefit the corporate governance of a public company?

Accepted Answer

Companies domiciled in countries with we

Question 10

Private benefits of corporate control:

Accepted Answer

A)  are cash flows from owning equity. 
B)  are equally shared by all investors. 
C)  are not equally shared by all investors. 
D)  do not exist. 
A)  are cash flows from owning equity. 
B)  are equally shared by all investors. 
C)  are not equally shared by all investors. 
D)  do not exist.

Question 11

The board of directors may grant stock options to managers in order to:

Accepted Answer

A)  save executive compensation costs. 
B)  use as a substitute for bonus. 
C)  align the interest of managers with that of shareholders. 
D)  None of these. 
A)  save executive compensation costs. 
B)  use as a substitute for bonus. 
C)  align the interest of managers with that of shareholders. 
D)  None of these.

Question 12

Concentrated corporate ownership is most prevalent in:

Accepted Answer

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

Question 13

Weak investor protection is associated with all of the following except:

Accepted Answer

A)  valuable stock markets. 
B)  sharp market declines during a financial crisis. 
C)  lower stock market capitalization. 
D)  fewer publicly traded companies. 
A)  valuable stock markets. 
B)  sharp market declines during a financial crisis. 
C)  lower stock market capitalization. 
D)  fewer publicly traded companies.

Question 14

Which of the following is not used to mitigate the agency problem?

Accepted Answer

A)  Debt. 
B)  Incentive contracts. 
C)  Overseas share listings. 
D)  All of these mechanisms are used to mitigate the agency problem. 
A)  Debt. 
B)  Incentive contracts. 
C)  Overseas share listings. 
D)  All of these mechanisms are used to mitigate the agency problem.

Question 15

There would be agency problems if?

Accepted Answer

A)  Complete contracts could be written. 
B)  If managers and shareholders would know all future contingencies. 
C)  Complete contracts cannot be written. 
D)  In the absence of conflicts of interest. 
A)  Complete contracts could be written. 
B)  If managers and shareholders would know all future contingencies. 
C)  Complete contracts cannot be written. 
D)  In the absence of conflicts of interest.

Question 16

Discuss the major advantage and key weakness of a public corporation.

Accepted Answer

The main advantage of public corporation

Question 17

Sarbanes-Oxley Act of 2002 stipulates that:

Accepted Answer

A)  a public accounting oversight board be created. 
B)  the company should appoint independent financial experts to its audit committee. 
C)  CEO and CFO sign off the company's financial statements. 
D)  All of these. 
A)  a public accounting oversight board be created. 
B)  the company should appoint independent financial experts to its audit committee. 
C)  CEO and CFO sign off the company's financial statements. 
D)  All of these.

Question 18

Morck,Shleifer and Vishny (1988)find that:

Accepted Answer

A)  the entrenchment effect dominates the alignment effect. 
B)  the alignment effect dominates the entrenchment effect. 
C)  the entrenchment effect dominates the alignment effect over the range of managerial ownership between 5 percent and 25 percent. 
D)  the alignment effect dominates the entrenchment effect over the range of managerial ownership between 5 percent and 25 percent. 
A)  the entrenchment effect dominates the alignment effect. 
B)  the alignment effect dominates the entrenchment effect. 
C)  the entrenchment effect dominates the alignment effect over the range of managerial ownership between 5 percent and 25 percent. 
D)  the alignment effect dominates the entrenchment effect over the range of managerial ownership between 5 percent and 25 percent.

Question 19

How are investors protected under English common law?
 What are the implications?

Accepted Answer

The English common law protects sharehol

Question 20

Dominant investors may acquire control through all of the following except:

Accepted Answer

A)  interfirm cross-holdings. 
B)  intrafirm cross-holdings. 
C)  shares with superior voting rights. 
D)  pyramidal ownership structure. 
A)  interfirm cross-holdings. 
B)  intrafirm cross-holdings. 
C)  shares with superior voting rights. 
D)  pyramidal ownership structure.

Exam 21: Corporate Governance Around the World

Managers may inappropriately use the residual control rights:

Private benefits of corporate control will tend to be higher in:

Corporate governance can be defined as:

Discuss the concept of "private benefits of corporate control".

Agency problems may be alleviated by:

Corporate governance reform requires all of the following except:

Suppose Mr.Lee and his relatives hold 30% of shares outstanding of Samsung Life,which in turn holds 20% of Samsung Electronics.What is the cash flow right of the Lee family in Samsung Electronics?

Which of the following statements is correct?

How can listing overseas benefit the corporate governance of a public company?

Private benefits of corporate control:

The board of directors may grant stock options to managers in order to:

Concentrated corporate ownership is most prevalent in:

Weak investor protection is associated with all of the following except:

Which of the following is not used to mitigate the agency problem?

There would be agency problems if?

Discuss the major advantage and key weakness of a public corporation.

Sarbanes-Oxley Act of 2002 stipulates that:

Morck,Shleifer and Vishny (1988)find that:

How are investors protected under English common law? What are the implications?

Dominant investors may acquire control through all of the following except:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

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