Question 1

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 above 
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 above

Question 2

The separation of the company's ownership and control,

Accepted Answer

A) is especially prevalent in such countries as the United States and the United Kingdom, where corporate ownership is highly diffused. 
B) is especially prevalent in such countries as the Italy and Mexico, where corporate ownership is highly concentrated. 
C) is a rational response to the agency problem. 
D) none of the above 
A) is especially prevalent in such countries as the United States and the United Kingdom, where corporate ownership is highly diffused. 
B) is especially prevalent in such countries as the Italy and Mexico, where corporate ownership is highly concentrated. 
C) is a rational response to the agency problem. 
D) none of the above

Question 3

In the United States,managers are bound by the "duty of loyalty" to serve the shareholders.

Accepted Answer

A) This is an ethical, not legal, obligation. 
B) This is a legal obligation. 
C) This is only a moral obligation; there are no penalties. 
A) This is an ethical, not legal, obligation. 
B) This is a legal obligation. 
C) This is only a moral obligation; there are no penalties.

Question 4

In the graph at right,X,Y,and Z represent

Accepted Answer

A) entrenchment, alignment, entrenchment. 
B) alignment, entrenchment, alignment. 
C) misalignment and alignment. 
D) agency costs of debt and equity. 
A) entrenchment, alignment, entrenchment. 
B) alignment, entrenchment, alignment. 
C) misalignment and alignment. 
D) agency costs of debt and equity.

Question 5

The voting premium,defined as the total vote value (value of a vote times the number of votes)as a proportion of the firm's equity market value is only about 2 percent in the United States and 36 percent in Mexico,suggesting that in Mexico,

Accepted Answer

A) dominant shareholders extract substantial private benefits of control. 
B) dominant shareholders overpay and thus fail to extract substantial private benefits. 
C) minority shareholders share in the private benefits of control. 
D) none of the above 
A) dominant shareholders extract substantial private benefits of control. 
B) dominant shareholders overpay and thus fail to extract substantial private benefits. 
C) minority shareholders share in the private benefits of control. 
D) none of the above

Question 6

After a hostile takeover

Accepted Answer

A) the existing management team is usually fired. 
B) the existing management team is usually retained at a higher wage. 
C) the target company usually mounts a takeover defense. 
A) the existing management team is usually fired. 
B) the existing management team is usually retained at a higher wage. 
C) the target company usually mounts a takeover defense.

Question 7

Benetton,an Italian clothier,is listed on the New York Stock Exchange.

Accepted Answer

A) This decision provides their shareholders with a higher degree of protection than is available in Italy. 
B) This decision can be a signal of the company's commitment to shareholder rights. 
C) This may make investors both in Italy and abroad more willing to provide capital and to increase the value of the pre-existing shares. 
D) All of the above 
A) This decision provides their shareholders with a higher degree of protection than is available in Italy. 
B) This decision can be a signal of the company's commitment to shareholder rights. 
C) This may make investors both in Italy and abroad more willing to provide capital and to increase the value of the pre-existing shares. 
D) All of the above

Question 8

Comparing the U.S.with the German and Japanese corporate governance systems,

Accepted Answer

A) the U.S.system is "market centered". 
B) the German and Japanese systems are "bank centered". 
C) it seems fair to say that no country has a perfect system. 
D) all of the above. 
A) the U.S.system is "market centered". 
B) the German and Japanese systems are "bank centered". 
C) it seems fair to say that no country has a perfect system. 
D) all of the above.

Question 9

The formula to compute the value of the "block premium" is

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

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

Question 11

The key requirements of the Cadbury Code of Best Practice 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) both a and b 
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) both a and b

Question 12

In the U.S.,corporate governance reform has included all of the following except:

Accepted Answer

A) strengthen the independence of boards of directors. 
B) enhancing the transparency and disclosure of financial statements. 
C) energizing the regulatory an monitoring functions of the SEC. 
D) requiring auditors to sit on the boards of directors. 
A) strengthen the independence of boards of directors. 
B) enhancing the transparency and disclosure of financial statements. 
C) energizing the regulatory an monitoring functions of the SEC. 
D) requiring auditors to sit on the boards of directors.

Question 13

In the United Kingdom,the majority of public companies

Accepted Answer

A) voluntarily abide by the Code of Best Practice on corporate governance. 
B) are compelled by law to abide by the Code of Best Practice on corporate governance. 
C) do not abide by the Code of Best Practice on corporate governance. 
A) voluntarily abide by the Code of Best Practice on corporate governance. 
B) are compelled by law to abide by the Code of Best Practice on corporate governance. 
C) do not abide by the Code of Best Practice on corporate governance.

Question 14

In countries with concentrated ownership

Accepted Answer

A) hostile takeovers are quite rare. 
B) hostile takeovers are quite common. 
A) hostile takeovers are quite rare. 
B) hostile takeovers are quite common.

Question 15

The key weakness of the public corporation is

Accepted Answer

A) too many shareholders, which makes it difficult to make corporate decision. 
B) relatively high corporate income tax rates. 
C) conflicts of interest between managers and shareholders. 
D) conflicts of interests between shareholders and bondholders. 
A) too many shareholders, which makes it difficult to make corporate decision. 
B) relatively high corporate income tax rates. 
C) conflicts of interest between managers and shareholders. 
D) conflicts of interests between shareholders and bondholders.

Question 16

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 above 
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 above

Question 17

One of the objectives of corporate governance reform is to,

Accepted Answer

A) introduce expensive and burdensome accounting reforms. 
B) strengthen the protection of outside investors from expropriation by managers and controlling insiders. 
C) provide taxpayer financing for corporate raiders to strengthen the discipline of the marketplace. 
D) none of the above 
A) introduce expensive and burdensome accounting reforms. 
B) strengthen the protection of outside investors from expropriation by managers and controlling insiders. 
C) provide taxpayer financing for corporate raiders to strengthen the discipline of the marketplace. 
D) none of the above

Question 18

A pyramidal ownership structure is one in which

Accepted Answer

A) a shareholder controls a holding company that owns a controlling block of another company, which in turn owns controlling interests in yet another company, and so on. 
B) equity cross-holdings among a group of companies, such as keiretsu and chaebols can be used to concentrate and leverage voting rights to acquire control. 
C) a combination of these schemes may also be used to leverage control in a pyramidal ownership structure. 
A) a shareholder controls a holding company that owns a controlling block of another company, which in turn owns controlling interests in yet another company, and so on. 
B) equity cross-holdings among a group of companies, such as keiretsu and chaebols can be used to concentrate and leverage voting rights to acquire control. 
C) a combination of these schemes may also be used to leverage control in a pyramidal ownership structure.

Question 19

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 20

The Sarbanes-Oxley Act of 2002

Accepted Answer

A) has had the consequence that many foreign firms have de-listed in the U.S.exchanges and listed their shares on the London Stock Exchange and other European exchanges. 
B) has increased the pace of foreign firms listing their shares in the U.S. 
C) a and b are both true 
D) all of the above 
A) has had the consequence that many foreign firms have de-listed in the U.S.exchanges and listed their shares on the London Stock Exchange and other European exchanges. 
B) has increased the pace of foreign firms listing their shares in the U.S. 
C) a and b are both true 
D) all of the above

Exam 4: Corporate Governance Around the World

The key requirements of the Sarbanes-Oxley Act state that

The separation of the company's ownership and control,

In the United States,managers are bound by the "duty of loyalty" to serve the shareholders.

In the graph at right,X,Y,and Z represent

The voting premium,defined as the total vote value (value of a vote times the number of votes)as a proportion of the firm's equity market value is only about 2 percent in the United States and 36 percent in Mexico,suggesting that in Mexico,

After a hostile takeover

Benetton,an Italian clothier,is listed on the New York Stock Exchange.

Comparing the U.S.with the German and Japanese corporate governance systems,

The formula to compute the value of the "block premium" is

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

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

In the U.S.,corporate governance reform has included all of the following except:

In the United Kingdom,the majority of public companies

In countries with concentrated ownership

The key weakness of the public corporation is

The public corporation

One of the objectives of corporate governance reform is to,

A pyramidal ownership structure is one in which

When designing an incentive contract,

The Sarbanes-Oxley Act of 2002

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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