Question 1

What is backdating?

Accepted Answer

Backdating is the practice of choosing the grant date of a stock option retroactively so that the date of the grant would coincide with a date when the stock price was lower than its price at the time the grant was actually awarded.

Question 2

Activist investors can only achieve their goals by putting their issues to a shareholder vote.

Accepted Answer

A) True 
 B)False  False

Question 3

Having a founder and top executive also be a major shareholder:

Accepted Answer

A) always results in agency conflicts that are bad for minority shareholders. 
B) can sometimes,as in the case of Google,have benefits that outweigh the costs. 
C) is illegal in Canada and most other industrialized countries. 
D) is never beneficial to employees. 
E) inevitably leads to insider trading. 
A) always results in agency conflicts that are bad for minority shareholders. 
B) can sometimes,as in the case of Google,have benefits that outweigh the costs. 
C) is illegal in Canada and most other industrialized countries. 
D) is never beneficial to employees. 
E) inevitably leads to insider trading. B

Question 4

Which of the following is an example of an agency problem?

Accepted Answer

A) managers not working as diligently if they are not the sole owner of the business 
B) the board of directors firing an incompetent manager 
C) the manager owning a great deal of stock in the company 
D) a corporate raider attempting to purchase the company 
E) managers using cash to increase dividends 
A) managers not working as diligently if they are not the sole owner of the business 
B) the board of directors firing an incompetent manager 
C) the manager owning a great deal of stock in the company 
D) a corporate raider attempting to purchase the company 
E) managers using cash to increase dividends

Question 5

The Smith family has a 45% stake in A company and A company has a 75% stake in B company.Finally,B company has a 35% stake in C company.What percentage ownership does the Smith family have in C company?

Accepted Answer

A) 21% 
B) 12% 
C) 34% 
D) 26% 
E) 16% 
A) 21% 
B) 12% 
C) 34% 
D) 26% 
E) 16%

Question 6

Academic studies have shown that greater managerial ownership is associated with greater value-reducing actions by managers.

Accepted Answer

A) True 
 B)False

Question 7

________ is a person making a trade based on privileged information.

Accepted Answer

A) Rogue trading 
B) Illegal trading 
C) Standard trading 
D) Insider trading 
E) Exchange trading 
A) Rogue trading 
B) Illegal trading 
C) Standard trading 
D) Insider trading 
E) Exchange trading

Question 8

Which monitors of a firm,other than the board of directors,become experts in the firm and are in a position to detect irregularities first?

Accepted Answer

A) securities analysts 
B) lenders 
C) employees 
D) regulators 
E) shareholders 
A) securities analysts 
B) lenders 
C) employees 
D) regulators 
E) shareholders

Question 9

The optimal level of sensitivity of a manager's compensation to the firm's performance depends on the manager's level of risk aversion.

Accepted Answer

A) True 
 B)False

Question 10

The most extreme form of direct action that shareholders can take is:

Accepted Answer

A) a resolution. 
B) to privately approach the board. 
C) a "no" vote. 
D) a proxy contest. 
E) a "say-on-pay" vote. 
A) a resolution. 
B) to privately approach the board. 
C) a "no" vote. 
D) a proxy contest. 
E) a "say-on-pay" vote.

Question 11

Describe the "stakeholder" model of corporate governance.

Accepted Answer

The agency costs and the ways to control

Question 12

Describe the main requirements of the Sarbanes-Oxley Act of 2002.

Accepted Answer

1.Strict limits are set on the amount of

Question 13

In many countries outside the United States,the central conflict is not between managers and shareholders,but instead between ________ and ________.

Accepted Answer

A) managers,regulators 
B) the board of directors,shareholders 
C) controlling shareholders,minority shareholders 
D) insiders,outsiders 
E) managers,the board of directors 
A) managers,regulators 
B) the board of directors,shareholders 
C) controlling shareholders,minority shareholders 
D) insiders,outsiders 
E) managers,the board of directors

Question 14

How do securities analysts provide outside monitoring of a corporation?

Accepted Answer

Since analysts collect extensive informa

Question 15

What are the main provisions of the DODD Frank Act?

Accepted Answer

1.Independent Compensation Committees: T

Question 16

The relationship between managerial ownership and firm value is unlikely to be the same for every firm,or even for different executives of the same firm.

Accepted Answer

A) True 
 B)False

Question 17

Examples of cross-holdings include: I.Japanese keiretsu

Accepted Answer

A) I,II,and IV 
B) I,II,and III 
C) I and IV 
D) I,II,III,and IV 
E) II and III 
A) I,II,and IV 
B) I,II,and III 
C) I and IV 
D) I,II,III,and IV 
E) II and III

Question 18

What are some of the negative effects of increasing the sensitivity of managerial pay to firm performance?

Accepted Answer

Increasing the pay-for-performance sensi

Question 19

What is the role of takeovers in corporate governance?

Accepted Answer

When internal governance systems such as

Question 20

Tammy is a member of the Board of Directors of Moon Corporation.Her husband is the manager of a large division.What type of director is Tammy?

Accepted Answer

A) inside director 
B) outside director 
C) grey director 
D) resident director 
E) unelected director 
A) inside director 
B) outside director 
C) grey director 
D) resident director 
E) unelected director

Exam 25: Corporate Governance

What is backdating?

Activist investors can only achieve their goals by putting their issues to a shareholder vote.

Having a founder and top executive also be a major shareholder:

Which of the following is an example of an agency problem?

The Smith family has a 45% stake in A company and A company has a 75% stake in B company.Finally,B company has a 35% stake in C company.What percentage ownership does the Smith family have in C company?

Academic studies have shown that greater managerial ownership is associated with greater value-reducing actions by managers.

________ is a person making a trade based on privileged information.

Which monitors of a firm,other than the board of directors,become experts in the firm and are in a position to detect irregularities first?

The optimal level of sensitivity of a manager's compensation to the firm's performance depends on the manager's level of risk aversion.

The most extreme form of direct action that shareholders can take is:

Describe the "stakeholder" model of corporate governance.

Describe the main requirements of the Sarbanes-Oxley Act of 2002.

In many countries outside the United States,the central conflict is not between managers and shareholders,but instead between ________ and ________.

How do securities analysts provide outside monitoring of a corporation?

What are the main provisions of the DODD Frank Act?

The relationship between managerial ownership and firm value is unlikely to be the same for every firm,or even for different executives of the same firm.

Examples of cross-holdings include: I.Japanese keiretsu

What are some of the negative effects of increasing the sensitivity of managerial pay to firm performance?

What is the role of takeovers in corporate governance?

Tammy is a member of the Board of Directors of Moon Corporation.Her husband is the manager of a large division.What type of director is Tammy?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Filters

In many countries outside the United States,the central conflict is not between managers and shareholders,but instead between and .