Question 1

In the reality of corporate governance at the turn of this century,

Accepted Answer

A) boards of directors are often dominated by management-friendly insiders. 
B) a typical board of directors often has relatively few outside directors who can independently and objectively monitor the management. 
C) managers of one firm often sit on the boards of other firms,whose managers are on the board of the first firm.Due to the interlocking nature of these boards,there can exist a culture of "I'll overlook your problems if you overlook mine." 
D) all of the options have been true to a greater or lesser extent in the recent past. 
A) boards of directors are often dominated by management-friendly insiders. 
B) a typical board of directors often has relatively few outside directors who can independently and objectively monitor the management. 
C) managers of one firm often sit on the boards of other firms,whose managers are on the board of the first firm.Due to the interlocking nature of these boards,there can exist a culture of "I'll overlook your problems if you overlook mine." 
D) all of the options have been true to a greater or lesser extent in the recent past.

Question 2

The key requirements of the Cadbury Code of Best Practice state that

Accepted Answer

A) the compensation,nominating,and audit committees to be entirely composed of independent directors. 
B) the positions of CEO and chairman of the board should not reside in the same individual. 
C) listed companies to have boards of directors with a majority of independents. 
D) none of the options 
A) the compensation,nominating,and audit committees to be entirely composed of independent directors. 
B) the positions of CEO and chairman of the board should not reside in the same individual. 
C) listed companies to have boards of directors with a majority of independents. 
D) none of the options

Question 3

Private benefits of corporate control will tend to be higher in

Accepted Answer

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

Question 4

Why do managers tend to retain free cash flow?

Accepted Answer

A) Managers are in the best position to decide the best use of those funds. 
B) These funds are needed for undertaking profitable projects and the issue costs are less than new issues of stocks or bonds. 
C) Managers may not be acting in the shareholders best interest,and for a variety of reasons,want to use the free cash flow. 
D) none of the options 
A) Managers are in the best position to decide the best use of those funds. 
B) These funds are needed for undertaking profitable projects and the issue costs are less than new issues of stocks or bonds. 
C) Managers may not be acting in the shareholders best interest,and for a variety of reasons,want to use the free cash flow. 
D) none of the options

Question 5

Countries with strong shareholder protection tend to have more valuable stock markets and more companies listed on stock exchanges per capita than countries with weak protection.

Accepted Answer

A) True 
 B)False

Question 6

When designing an incentive contract,

Accepted Answer

A) it is important for the board of directors to set up an independent compensation committee that can carefully design the contract and diligently monitor manager's actions. 
B) senior executives can be trusted to not abuse incentive contracts by artificially manipulating accounting numbers since the auditors should look in to that. 
C) the presence of any incentive is enough,whether it is accounting based or stock-price based. 
D) the board of directors should always give the managers a "heads I win,tails you lose" type of option. 
A) it is important for the board of directors to set up an independent compensation committee that can carefully design the contract and diligently monitor manager's actions. 
B) senior executives can be trusted to not abuse incentive contracts by artificially manipulating accounting numbers since the auditors should look in to that. 
C) the presence of any incentive is enough,whether it is accounting based or stock-price based. 
D) the board of directors should always give the managers a "heads I win,tails you lose" type of option.

Question 7

Concentrated corporate ownership is most prevalent in

Accepted Answer

A) Italy. 
B) the U.K. 
C) the U.S. 
D) Australia. 
A) Italy. 
B) the U.K. 
C) the U.S. 
D) Australia.

Question 8

Concentrated ownership of a public company

Accepted Answer

A) can be an effective way to alleviate the agency problem between shareholders and managers. 
B) is the norm in Great Britain. 
C) tends to be an ineffective way to alleviate conflicts of interest between groups of shareholders. 
D) none of the options 
A) can be an effective way to alleviate the agency problem between shareholders and managers. 
B) is the norm in Great Britain. 
C) tends to be an ineffective way to alleviate conflicts of interest between groups of shareholders. 
D) none of the options

Question 9

In the United States,it is well documented that

Accepted Answer

A) boards dominated by their chief executives are prone to trouble. 
B) public scrutiny can help improve corporate governance. 
C) as public firms improve their corporate governance,the stock price goes up. 
D) all of the options 
A) boards dominated by their chief executives are prone to trouble. 
B) public scrutiny can help improve corporate governance. 
C) as public firms improve their corporate governance,the stock price goes up. 
D) all of the options

Question 10

It is important for society as a whole to solve the agency problem,since the agency problem

Accepted Answer

A) leads to waste of scarce resources. 
B) hampers capital market functions. 
C) retards economic growth. 
D) all of the options 
A) leads to waste of scarce resources. 
B) hampers capital market functions. 
C) retards economic growth. 
D) all of the options

Question 11

The board of directors may grant stock options to managers.These are

Accepted Answer

A) call options. 
B) put options. 
C) both of the options 
D) none of the options 
A) call options. 
B) put options. 
C) both of the options 
D) none of the options

Question 12

If an incentive contract specifies certain accounting performance,

Accepted Answer

A) that accounting number will likely be the focus of managers. 
B) managers will set aside the accounting goal if it conflicts with the goal of maximizing shareholder wealth. 
C) managers will be unable to manipulate the GAAP,so shareholders can be confident of having their wealth maximized. 
D) none of the options 
A) that accounting number will likely be the focus of managers. 
B) managers will set aside the accounting goal if it conflicts with the goal of maximizing shareholder wealth. 
C) managers will be unable to manipulate the GAAP,so shareholders can be confident of having their wealth maximized. 
D) none of the options

Question 13

The cost of compliance with the Sarbanes-Oxley Act

Accepted Answer

A) is a small amount,since most firms were playing by rules to begin with. 
B) disproportionately affects small firms. 
C) is paid for with tax credits for firms found to be in compliance. 
D) all of the options 
A) is a small amount,since most firms were playing by rules to begin with. 
B) disproportionately affects small firms. 
C) is paid for with tax credits for firms found to be in compliance. 
D) all of the options

Question 14

The public corporation

Accepted Answer

A) is jointly owned by a (potentially)large number of shareholders. 
B) offers shareholders limited liability. 
C) separates the ownership and control of a firm's assets. 
D) all of the options 
A) is jointly owned by a (potentially)large number of shareholders. 
B) offers shareholders limited liability. 
C) separates the ownership and control of a firm's assets. 
D) all of the options

Question 15

One implication of the Sarbanes-Oxley Act is that companies must appoint independent "financial experts" to their committees.Which of the major components is associated with this objective?

Accepted Answer

A) Accounting regulation 
B) Audit committee 
C) Internal control assessment 
D) Executive responsibility 
A) Accounting regulation 
B) Audit committee 
C) Internal control assessment 
D) Executive responsibility

Question 16

While debt can reduce agency costs between shareholders and management,

Accepted Answer

A) excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects,causing an underinvestment problem. 
B) with debt financing,companies can misuse debt to finance corporate empire building. 
C) excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects,causing an underinvestment problem.Additionally,with debt financing,companies can misuse debt to finance corporate empire building. 
D) none of the options 
A) excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects,causing an underinvestment problem. 
B) with debt financing,companies can misuse debt to finance corporate empire building. 
C) excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects,causing an underinvestment problem.Additionally,with debt financing,companies can misuse debt to finance corporate empire building. 
D) none of the options

Question 17

Morck,Shleifer,and Vishny (1988)studied the relationship between managerial ownership share and firm value for Fortune 500 U.S.companies.The results of their analysis suggested that the first turning point (the first vertical,dashed line between X and Y)is reached at ________ percent and the second turning point (the second vertical,dashed line between Y and Z)at about ________ percent,respectively.

Accepted Answer

A) 5; 25. 
B) 15; 50. 
C) 50; 75. 
D) none of the options 
A) 5; 25. 
B) 15; 50. 
C) 50; 75. 
D) none of the options

Question 18

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

Accepted Answer

A) 50 percent 
B) 10 percent 
C) 20 percent 
D) 6 percent 
A) 50 percent 
B) 10 percent 
C) 20 percent 
D) 6 percent

Question 19

Even though compliance with the Cadbury Code of Best Practice is voluntary,

Accepted Answer

A) the Cadbury Code has made a significant impact on the internal governance mechanisms of U.K.companies. 
B) the job security of U.K.chief executives has become more sensitive to the company performance,strengthening managerial accountability and weakening its entrenchment. 
C) joint CEO/COB (chief executive officer and chairman of the board)positions declined. 
D) all of the options 
A) the Cadbury Code has made a significant impact on the internal governance mechanisms of U.K.companies. 
B) the job security of U.K.chief executives has become more sensitive to the company performance,strengthening managerial accountability and weakening its entrenchment. 
C) joint CEO/COB (chief executive officer and chairman of the board)positions declined. 
D) all of the options

Question 20

The key requirements of the Sarbanes-Oxley Act state that

Accepted Answer

A) boards of directors should include at least three outside directors. 
B) the positions of CEO and chairman of the board should not reside in the same individual. 
C) compliance is mandatory for public corporations,optional for listed non-public corporations. 
D) none of the options. 
A) boards of directors should include at least three outside directors. 
B) the positions of CEO and chairman of the board should not reside in the same individual. 
C) compliance is mandatory for public corporations,optional for listed non-public corporations. 
D) none of the options.

In the reality of corporate governance at the turn of this century,

The key requirements of the Cadbury Code of Best Practice state that

Private benefits of corporate control will tend to be higher in

Why do managers tend to retain free cash flow?

Countries with strong shareholder protection tend to have more valuable stock markets and more companies listed on stock exchanges per capita than countries with weak protection.

When designing an incentive contract,

Concentrated corporate ownership is most prevalent in

Concentrated ownership of a public company

In the United States,it is well documented that

It is important for society as a whole to solve the agency problem,since the agency problem

The board of directors may grant stock options to managers.These are

If an incentive contract specifies certain accounting performance,

The cost of compliance with the Sarbanes-Oxley Act

The public corporation

One implication of the Sarbanes-Oxley Act is that companies must appoint independent "financial experts" to their committees.Which of the major components is associated with this objective?

While debt can reduce agency costs between shareholders and management,

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

Even though compliance with the Cadbury Code of Best Practice is voluntary,

The key requirements of the Sarbanes-Oxley Act state that

International Monetary System

Globalization and the Multinational Firm

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 4: Corporate Governance Around the World

In the reality of corporate governance at the turn of this century,

The key requirements of the Cadbury Code of Best Practice state that

Private benefits of corporate control will tend to be higher in

Why do managers tend to retain free cash flow?

Countries with strong shareholder protection tend to have more valuable stock markets and more companies listed on stock exchanges per capita than countries with weak protection.

When designing an incentive contract,

Concentrated corporate ownership is most prevalent in

Concentrated ownership of a public company

In the United States,it is well documented that

It is important for society as a whole to solve the agency problem,since the agency problem

The board of directors may grant stock options to managers.These are

If an incentive contract specifies certain accounting performance,

The cost of compliance with the Sarbanes-Oxley Act

The public corporation

One implication of the Sarbanes-Oxley Act is that companies must appoint independent "financial experts" to their committees.Which of the major components is associated with this objective?

While debt can reduce agency costs between shareholders and management,

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

Even though compliance with the Cadbury Code of Best Practice is voluntary,

The key requirements of the Sarbanes-Oxley Act state that

International Monetary System

Globalization and the Multinational Firm

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters