Question 1

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 2

The goal of a greater accounting transparency

Accepted Answer

A) is to impose more rules and harsher penalties for their violation. 
B) is to reduce the information asymmetry between corporate insiders and the public. 
C) is to discourage managerial self-dealings. 
D) answers b and c 
A) is to impose more rules and harsher penalties for their violation. 
B) is to reduce the information asymmetry between corporate insiders and the public. 
C) is to discourage managerial self-dealings. 
D) answers b and c

Question 3

In many countries hostile takeovers are relatively rare.This is so partly because of

Accepted Answer

A) the language barrier. 
B) concentrated ownership in these countries. 
C) cultural values and political environments disapproving hostile corporate takeovers. 
D) both b and c 
A) the language barrier. 
B) concentrated ownership in these countries. 
C) cultural values and political environments disapproving hostile corporate takeovers. 
D) both b and c

Question 4

One way to measure the value of private benefits of control

Accepted Answer

A) is to measure the difference in value between non-voting shares and voting shares. 
B) is to measure the value of the "block premium" the value difference between the price per share paid for a control block of shares versus the exchange price of regular shares. 
C) both a and b 
A) is to measure the difference in value between non-voting shares and voting shares. 
B) is to measure the value of the "block premium" the value difference between the price per share paid for a control block of shares versus the exchange price of regular shares. 
C) both a and b

Question 5

Several studies document the empirical link between

Accepted Answer

A) weak investor protection and GDP growth. 
B) financial development and economic growth. 
C) growth in GDP and concentrated ownership. 
D) none of the above 
A) weak investor protection and GDP growth. 
B) financial development and economic growth. 
C) growth in GDP and concentrated ownership. 
D) none of the above

Question 6

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. 
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.

Question 7

Free cash flow refers to

Accepted Answer

A) a firm's cash reserve in excess of tax obligation. 
B) a firm's funds in excess of what's needed for undertaking all profitable projects. 
C) a firm's cash reserve in excess of interest and tax payments. 
D) a firm's income tax refund that is due to interest payments on borrowing. 
A) a firm's cash reserve in excess of tax obligation. 
B) a firm's funds in excess of what's needed for undertaking all profitable projects. 
C) a firm's cash reserve in excess of interest and tax payments. 
D) a firm's income tax refund that is due to interest payments on borrowing.

Question 8

The Cadbury Code of Best Practice

Accepted Answer

A) is the U.N.equivalent of the Sarbanes-Oxley Act. 
B) is voluntary, but firms that fail to comply must explain why they choose not to comply. 
C) has the force of law, like the Sarbanes-Oxley Act. 
D) none of the above 
A) is the U.N.equivalent of the Sarbanes-Oxley Act. 
B) is voluntary, but firms that fail to comply must explain why they choose not to comply. 
C) has the force of law, like the Sarbanes-Oxley Act. 
D) none of the above

Question 9

The agency problem tends

Accepted Answer

A) to be more serious in firms with free cash flows. 
B) to be more serious in firms with excessive amounts of excess cash. 
C) to be less serious in firms with few numbers of shareholders. 
D) all of the above 
A) to be more serious in firms with free cash flows. 
B) to be more serious in firms with excessive amounts of excess cash. 
C) to be less serious in firms with few numbers of shareholders. 
D) all of the above

Question 10

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Accepted Answer

A) by moving to a better county. 
B) by listing their stocks in countries with strong investor protection. 
C) by voluntarily complying with the provisions of the U.S.Sarbanes-Oxley Act. 
D) having a press conference and promising to be nice to their investors. 
A) by moving to a better county. 
B) by listing their stocks in countries with strong investor protection. 
C) by voluntarily complying with the provisions of the U.S.Sarbanes-Oxley Act. 
D) having a press conference and promising to be nice to their investors.

Question 11

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 above 
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 above

Question 12

In Germany the corporate board is

Accepted Answer

A) legally charged with representing the interests of shareholders exclusively. 
B) legally charged with looking after the interests of stakeholders (e.g., workers, creditors, etc.) in general, not just shareholders. 
C) legally charged as a supervisory board only. 
D) legally charged as a management board only. 
A) legally charged with representing the interests of shareholders exclusively. 
B) legally charged with looking after the interests of stakeholders (e.g., workers, creditors, etc.) in general, not just shareholders. 
C) legally charged as a supervisory board only. 
D) legally charged as a management board only.

Question 13

Suppose you are the CEO of company A,and you serve on the board of company B,while the CEO of B is on your board.

Accepted Answer

A) This is a potential conflict of interest for both parties. 
B) This is normal and even a desirable situation since it allows for efficient information sharing between the firms. 
C) There is a potential conflict for the shareholders of the two firms. 
D) All of the above are true. 
A) This is a potential conflict of interest for both parties. 
B) This is normal and even a desirable situation since it allows for efficient information sharing between the firms. 
C) There is a potential conflict for the shareholders of the two firms. 
D) All of the above are true.

Question 14

In theory,

Accepted Answer

A) managers are hired by the shareholders at the annual stockholders meeting.If the managers turn in a bad year, new ones get hired. 
B) shareholders hire the managers to oversee the board of directors. 
C) managers are hired by the board of directors; the board is accountable to the shareholders. 
D) none of the above 
A) managers are hired by the shareholders at the annual stockholders meeting.If the managers turn in a bad year, new ones get hired. 
B) shareholders hire the managers to oversee the board of directors. 
C) managers are hired by the board of directors; the board is accountable to the shareholders. 
D) none of the above

Question 15

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

Accepted Answer

A) call options. 
B) put options. 
C) none of the above 
A) call options. 
B) put options. 
C) none of the above

Question 16

Unless investors can derive significant private benefits of control,

Accepted Answer

A) they will pay small premiums for voting shares over nonvoting shares. 
B) they will pay moderate premiums for voting shares over nonvoting shares. 
C) they will pay substantial premiums for voting shares over nonvoting shares. 
D) they will not pay substantial premiums for voting shares over nonvoting shares. 
A) they will pay small premiums for voting shares over nonvoting shares. 
B) they will pay moderate premiums for voting shares over nonvoting shares. 
C) they will pay substantial premiums for voting shares over nonvoting shares. 
D) they will not pay substantial premiums for voting shares over nonvoting shares.

Question 17

Suppose the managers of a company have driven the stock price down because they have spent the investors' money on lavish perquisites like golf club memberships.

Accepted Answer

A) This situation may prompt a corporate raider to buy up the shares of the firm in a hostile takeover. 
B) If the hostile takeover is successful, the managers will probably lose their jobs in the ensuing restructuring. 
C) If the restructuring is successful, the corporate raider can sell his shares at a profit. 
D) All of the above 
A) This situation may prompt a corporate raider to buy up the shares of the firm in a hostile takeover. 
B) If the hostile takeover is successful, the managers will probably lose their jobs in the ensuing restructuring. 
C) If the restructuring is successful, the corporate raider can sell his shares at a profit. 
D) All of the above

Question 18

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 above 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 above have been true to a greater or lesser extent in the recent past.

Question 19

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 20

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 above 
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 above

Exam 4: Corporate Governance Around the World

Private benefits of corporate control will tend to be higher in

The goal of a greater accounting transparency

In many countries hostile takeovers are relatively rare.This is so partly because of

One way to measure the value of private benefits of control

Several studies document the empirical link between

If an incentive contract specifies certain accounting performance

Free cash flow refers to

The Cadbury Code of Best Practice

The agency problem tends

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Concentrated ownership of a public company

In Germany the corporate board is

Suppose you are the CEO of company A,and you serve on the board of company B,while the CEO of B is on your board.

In theory,

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

Unless investors can derive significant private benefits of control,

Suppose the managers of a company have driven the stock price down because they have spent the investors' money on lavish perquisites like golf club memberships.

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

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.

In the United States,it is well documented that

Globalization and the Multinational Firm

International Monetary System

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

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