Question 1

Which of the following is a reason why managers act to maximize shareholder wealth in Anglo-American markets?

Accepted Answer

A) The use of stock options to align the goals of shareholders and managers. 
B) The market for corporate control that allows for outside takeover of the firm. 
C) Performance based compensation for executive management. 
D) all of the above 
A) The use of stock options to align the goals of shareholders and managers. 
B) The market for corporate control that allows for outside takeover of the firm. 
C) Performance based compensation for executive management. 
D) all of the above D

Question 2

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called

Accepted Answer

A) market efficiency. 
B) the SWM model. 
C) agency theory. 
D) the SCM model. 
A) market efficiency. 
B) the SWM model. 
C) agency theory. 
D) the SCM model. C

Question 3

Which of the following is NOT commonly associated with a government affiliated form of corporate governance regime?

Accepted Answer

A) No minority influence. 
B) Lack of transparency. 
C) State ownership of enterprise. 
D) All are associated with this type of corporate governance regime. 
A) No minority influence. 
B) Lack of transparency. 
C) State ownership of enterprise. 
D) All are associated with this type of corporate governance regime. D

Question 4

Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.

Accepted Answer

Shareholder wealth maximization attempts

Question 5

Under the Shareholder Wealth Maximization Model of corporate governance, poor firm performance is likely to be faced with all but which of the following?

Accepted Answer

A) Sale of shares by disgruntled current shareholders. 
B) Shareholder activism to attempt a change in current management. 
C) As a maximum threat, initiation of a corporate takeover. 
D) Prison time for executive management. 
A) Sale of shares by disgruntled current shareholders. 
B) Shareholder activism to attempt a change in current management. 
C) As a maximum threat, initiation of a corporate takeover. 
D) Prison time for executive management.

Question 6

Which of the following operational goals for the international firm may be incompatible with the others?

Accepted Answer

A) Maintaining a strong local currency. 
B) Maximization of after-tax income. 
C) Minimization of the firm's effective global tax burden. 
D) Each of these goals may be incompatible with one or more of the others. 
A) Maintaining a strong local currency. 
B) Maximization of after-tax income. 
C) Minimization of the firm's effective global tax burden. 
D) Each of these goals may be incompatible with one or more of the others.

Question 7

According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

Accepted Answer

A) True 
B) False 
A) True 
B) False

Question 8

The relatively low cost of compliance with the Sarbanes-Oxley Act (SOX)has been a surprising benefit of the act.

Accepted Answer

A) True 
 B)False

Question 9

The stakeholder capitalism model holds that total risk (operational and financial)is more important than just systematic risk.

Accepted Answer

A) True 
B) False 
A) True 
B) False

Question 10

In the U.S. and U.K. stock markets are characterized by ownership of firms concentrated in the hands of a few controlling shareholders. In contrast, the rest of the world tends to have more widespread ownership of shares.

Accepted Answer

A) True 
 B)False

Question 11

In recent years the trend has been for markets to increasing focus on the shareholder wealth form of wealth maximization.

Accepted Answer

A) True 
B) False 
A) True 
B) False

Question 12

Patient Capitalism is characterized by short-term focus by both management and investors.

Accepted Answer

A) True 
 B)False

Question 13

The stakeholder capitalism model does not assume that equity markets are either efficient or inefficient.

Accepted Answer

A) True 
 B)False

Question 14

"Maximize corporate wealth"

Accepted Answer

A) is the primary objective of the non-Anglo-American model of management. 
B) as a management objective treats shareholders on a par with other corporate stakeholders such as creditors, labor, and local community. 
C) has a broader definition than just financial wealth. 
D) all of the above 
A) is the primary objective of the non-Anglo-American model of management. 
B) as a management objective treats shareholders on a par with other corporate stakeholders such as creditors, labor, and local community. 
C) has a broader definition than just financial wealth. 
D) all of the above

Question 15

Signed into law on July 30, 2002, the ________ Act requires CEOs of publicly traded companies to vouch for the veracity of the firm's published financial statements.

Accepted Answer

A) Smoot-Hawley 
B) Humphrey-Hawkins 
C) McCain-Merrill 
D) Sarbanes-Oxley 
A) Smoot-Hawley 
B) Humphrey-Hawkins 
C) McCain-Merrill 
D) Sarbanes-Oxley

Question 16

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

Accepted Answer

A) Equity markets; executive management 
B) Debt markets; board of directors 
C) Executive management; auditors 
D) Auditors; regulators 
A) Equity markets; executive management 
B) Debt markets; board of directors 
C) Executive management; auditors 
D) Auditors; regulators

Question 17

The primary operational goal for the firm is to

Accepted Answer

A) maximize after-tax profits in each country where the firm is operating. 
B) minimize the total financial risk to the firm. 
C) maximize the consolidated after-tax profits of the firm. 
D) maximize the total risk to the firm. 
A) maximize after-tax profits in each country where the firm is operating. 
B) minimize the total financial risk to the firm. 
C) maximize the consolidated after-tax profits of the firm. 
D) maximize the total risk to the firm.

Question 18

Investor protection is typically better in countries with codified civil law (the Code Napoleon)than in countries with a legal system based in English common law.

Accepted Answer

A) True 
 B)False

Question 19

The stakeholder capitalism model assumes that only systematic risk "counts" or is a prime concern for management.

Accepted Answer

A) True 
 B)False

Question 20

The Sarbanes-Oxley Act, passed by the U.S. Congress in July 2002, was designed to

Accepted Answer

A) reinstitute heavy tariffs on international trade. 
B) reform corporate governance. 
C) limit the Federal Reserve Board's ability to engage in the buying and selling of gold. 
D) limit trade with countries deemed lenient on terrorism. 
A) reinstitute heavy tariffs on international trade. 
B) reform corporate governance. 
C) limit the Federal Reserve Board's ability to engage in the buying and selling of gold. 
D) limit trade with countries deemed lenient on terrorism.

Exam 2: Financial Goals and Corporate Governance

Which of the following is a reason why managers act to maximize shareholder wealth in Anglo-American markets?

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called

Which of the following is NOT commonly associated with a government affiliated form of corporate governance regime?

Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.

Under the Shareholder Wealth Maximization Model of corporate governance, poor firm performance is likely to be faced with all but which of the following?

Which of the following operational goals for the international firm may be incompatible with the others?

According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

The relatively low cost of compliance with the Sarbanes-Oxley Act (SOX)has been a surprising benefit of the act.

The stakeholder capitalism model holds that total risk (operational and financial)is more important than just systematic risk.

In the U.S. and U.K. stock markets are characterized by ownership of firms concentrated in the hands of a few controlling shareholders. In contrast, the rest of the world tends to have more widespread ownership of shares.

In recent years the trend has been for markets to increasing focus on the shareholder wealth form of wealth maximization.

Patient Capitalism is characterized by short-term focus by both management and investors.

The stakeholder capitalism model does not assume that equity markets are either efficient or inefficient.

"Maximize corporate wealth"

Signed into law on July 30, 2002, the ________ Act requires CEOs of publicly traded companies to vouch for the veracity of the firm's published financial statements.

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

The primary operational goal for the firm is to

Investor protection is typically better in countries with codified civil law (the Code Napoleon)than in countries with a legal system based in English common law.

The stakeholder capitalism model assumes that only systematic risk "counts" or is a prime concern for management.

The Sarbanes-Oxley Act, passed by the U.S. Congress in July 2002, was designed to

Globalization and the Multinational Enterprise

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

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When discussing the structure of corporate governance, the authors distinguish between internal and external factors. is an example of an internal factor, and is an example of an external factor.