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1、Chapter 04 - Corporate Governance Around the World4-1 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a
2、website, in whole or part.Lecture 14 (Chapter 04) Corporate Governance Around the WorldTrue / False Questions1. 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. True Fals
3、eMultiple Choice Questions2. Corporate governance can be defined as A. the economic, legal, and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers and other stakeholders of the company. B. the general framework in which company manage
4、ment is selected and monitored. C. the rules and regulations adopted by boards of directors specifying how to manage companies. D. the government-imposed rules and regulations affecting corporate management.3. When managerial self-dealings are excessive and left unchecked, A. they can have serious n
5、egative effects on share values. B. they can impede the proper functions of capital markets. C. they can impede such measures as GDP growth. D. all of the above4. Corporate governance structure A. varies a great deal across countries. B. has become homogenized following the integration of capital ma
6、rkets. C. has become homogenized due to cross-listing of shares of many public corporations. D. none of the aboveChapter 04 - Corporate Governance Around the World4-2 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribu
7、tion in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.5. The genius of public corporations stems from their capacity to allow efficient sharing or spreading of risk among many investors, who can buy and sell their o
8、wnership shares on liquid stock exchanges and let professional managers run the company on behalf of shareholders. This risk sharing stems from A. the liquidity of the shares. B. the limited liability of shareholders. C. the limited liability of bondholders. D. the limited ability of shareholders.6.
9、 In a public company with diffused ownership, the board of directors is entrusted with A. monitoring the auditors and safeguarding the interests of shareholders. B. monitoring the shareholders and safeguarding the interests of management. C. monitoring the management and safeguarding the interests o
10、f shareholders. D. none of the above7. The key weakness of the public corporation is 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 bet
11、ween shareholders and bondholders.8. When company ownership is diffuse, A. a “free rider“ problem discourages shareholder activism. B. the large number of shareholders ensures strong monitoring of managerial behavior because with a large enough group, theres almost always someone who will to incur t
12、he costs of monitoring management. C. few shareholders have a strong enough incentive to incur the costs of monitoring management. D. both a) and c) are correctChapter 04 - Corporate Governance Around the World4-3 2012 by McGraw-Hill Education. This is proprietary material solely for authorized inst
13、ructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.9. In many countries with concentrated ownership A. the conflicts of interest between shareholders and managers ar
14、e worse than in countries with diffuse ownership of firms. B. the conflicts of interest are greater between large controlling shareholders and small outside shareholders than between managers and shareholders. C. the conflicts of interest are greater between managers and shareholders than between la
15、rge controlling shareholders and small outside shareholders. D. corporate forms of business organization with concentrated ownership are rare.10. In what country do the three largest shareholders control, on average, about 60 percent of the shares of a public company? A. United States B. Canada C. G
16、reat Britain D. Italy11. The public corporation A. is jointly owned by a (potentially) large number of shareholders. B. offers shareholders limited liability. C. separates the ownership and control of a firms assets. D. all of the above12. The key strengths of the public corporation is/are A. their
17、capacity to allow efficient risk sharing among many investors. B. their capacity to raise large amounts of funds at relatively low cost. C. their capacity to consolidate decision-making. D. all of the above13. The central issue of corporate governance is A. how to protect creditors from managers and
18、 controlling shareholders. B. how to protect outside investors from the controlling insiders. C. how to alleviate the conflicts of interest between managers and shareholders. D. how to alleviate the conflicts of interest between shareholders and bondholders.Chapter 04 - Corporate Governance Around t
19、he World4-4 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.14. In theory, A
20、. 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.
21、none of the above15. In the reality of corporate governance at the turn of this century, 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
22、. 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 “Ill overlook your problems if you overlook mine.“ D. all of the above have been true to a greater or less
23、er extent in the recent past.16. The strongest protection for investors is provided by A. English common law countries, such as Canada, the United States, and the U.K. B. French civil law countries, such as Belgium, Italy, and Mexico. C. a weak board of directors. D. socialized firms.17. The public
24、corporation has a key weakness: A. the conflicts of interest between bondholders and shareholders. B. the conflicts of interest between managers and bondholders. C. the conflicts of interest between stakeholders and shareholders. D. the conflicts of interest between managers and shareholders.Chapter
25、 04 - Corporate Governance Around the World4-5 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website
26、, in whole or part.18. The separation of the companys ownership and control, 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 o
27、wnership is highly concentrated. C. is a rational response to the agency problem. D. none of the above19. In the United States, managers are legally bound by the “duty of loyalty“ to A. the board of directors. B. to the shareholders. C. to the bondholders. D. to the government.20. In the United Stat
28、es, managers are bound by the “duty of loyalty“ to serve the shareholders. 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.21. Outside the United States and the United Kingdom, A. concentrated ownership of the co
29、mpany is more the exception than the rule. B. diffused ownership of the company is more the exception than the rule. C. partnerships are more important than corporations. D. none of the above22. A complete contract between shareholders and managers A. would specify exactly what the manager will do u
30、nder each of all possible future contingencies. B. would be an expensive contract to write and a very expensive contract to monitor. C. would eliminate any conflicts of interest (and managerial discretion). D. all of the aboveChapter 04 - Corporate Governance Around the World4-6 2012 by McGraw-Hill
31、Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.23. Why is it rational to make shareholders “wea
32、k“ by giving control to the managers of the firm? A. This may be rational when shareholders may be neither qualified nor interested in making business decisions. B. This may be rational since many shareholders find it easier to sell their shares in an underperforming firm than to monitor the managem
33、ent. C. This may be rational to the extent that managers are answerable to the board of directors. D. All of the above are explanations for the separation of ownership and control.24. Free cash flow refers to A. a firms cash reserve in excess of tax obligation. B. a firms funds in excess of whats ne
34、eded for undertaking all profitable projects. C. a firms cash reserve in excess of interest and tax payments. D. a firms income tax refund that is due to interest payments on borrowing.25. The investors supply funds to the company but are not involved in the companys daily decision making. As a resu
35、lt, many public companies come to have A. strong shareholders and weak managers. B. strong managers and weak shareholders. C. strong managers and strong shareholders. D. weak managers and weak shareholders.26. The agency problem refers to the possible conflicts of interest between A. self-interested
36、 managers as principals and shareholders of the firm who are the agents. B. altruistic managers as agents and shareholders of the firm who are the principals. C. self-interested managers as agents and shareholders of the firm who are the principals. D. dutiful managers as principals and shareholders
37、 of the firm who are the agents.Chapter 04 - Corporate Governance Around the World4-7 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forward
38、ed, distributed, or posted on a website, in whole or part.27. Self-interested managers may be tempted to A. indulge in expensive perquisites at company expense. B. adopt antitakeover measures for their company to ensure their personal job security. C. waste company funds by undertaking unprofitable
39、projects that benefit themselves but not shareholders. D. all of the above are potential abuses that self-interested managers may be tempted to visit upon shareholders.28. Suppose in order to defraud the shareholders, a manager sets up an independent company that he owns sells the main companys outp
40、ut to this company. He would be tempted to set the transfer price A. below market prices. B. above market prices. C. at the market price. D. in accordance with GAAP.29. Suppose in order to defraud the shareholders, a manager sets up an independent company that he owns buys one of the main companys i
41、nputs of production from this company. He would be tempted to set the transfer price A. below market prices. B. above market prices. C. at the market price. D. in accordance with GAAP.30. Why do managers tend to retain free cash flow? A. Managers are in the best position to decide the best use of th
42、ose 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 aboveChapter 04 - Co
43、rporate Governance Around the World4-8 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in who
44、le or part.31. Managerial entrenchment efforts are clear signs of the agency problem. They include A. anti-takeover defenses. B. poison pills. C. changes in the voting procedures to make it more difficult for the firm to be taken over. D. all of the above32. In high-growth industries where companies
45、 internally generated funds fall short of profitable investment opportunities, A. managers are less likely to waste funds in unprofitable projects. B. managers are more likely to waste funds in unprofitable projects.33. The agency problem tends A. to be more serious in firms with free cash flows. B.
46、 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 above34. In the graph at right, X, Y, and Z representA. entrenchment, alignment, entrenchment. B. alignment, entrenchment, alignment. C. misalignment and
47、 alignment. D. agency costs of debt and equity.Chapter 04 - Corporate Governance Around the World4-9 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, dupl
48、icated, forwarded, distributed, or posted on a website, in whole or part.35. In the graph at right, for Fortune 500 companies, X, Y areA. 5% and 25%. B. 15% and 50%. C. 50% and 75%. D. None of the above36. Which of the following is true regarding leveraged buy-outs (LBOs)? A. LBOs involve managers o
49、r buyout partners acquiring controlling interests in public companies, usually financed by heavy borrowing. B. Concentrated ownership and high level of debt associated with LBOs are the mechanism for solving the agency problem. C. LBOs improve a companys free cash flow and this is the mechanism by which they can solve the agency problem. D. Both a) and b)37. Tobins Q is A. the ratio of the market value of company assets to the replacement costs of the assets. B. a means to find
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