国际金融学练习题：lecture 4

Lecture14(Chapter04)CorporateGovernanceAroundtheWorld

True/FalseQuestions

1.

Countrieswithstrongshareholderprotectiontendtohavemorevaluablestockmarketsandmorecompanieslistedonstockexchangespercapitathancountrieswithweakprotection.

True

False

MultipleChoiceQuestions

2.

Corporategovernancecanbedefinedas

A.

theeconomic,legal,andinstitutionalframeworkinwhichcorporatecontrolandcashflowrightsaredistributedamongshareholders,managersandotherstakeholdersofthecompany.

B.

thegeneralframeworkinwhichcompanymanagementisselectedandmonitored.

C.

therulesandregulationsadoptedbyboardsofdirectorsspecifyinghowtomanagecompanies.

D.

thegovernment-imposedrulesandregulationsaffectingcorporatemanagement.

3.

Whenmanagerialself-dealingsareexcessiveandleftunchecked,

A.

theycanhaveseriousnegativeeffectsonsharevalues.

B.

theycanimpedetheproperfunctionsofcapitalmarkets.

C.

theycanimpedesuchmeasuresasGDPgrowth.

D.

alloftheabove

4.

Corporategovernancestructure

A.

variesagreatdealacrosscountries.

B.

hasbecomehomogenizedfollowingtheintegrationofcapitalmarkets.

C.

hasbecomehomogenizedduetocross-listingofsharesofmanypubliccorporations.

D.

noneoftheabove

5.

Thegeniusofpubliccorporationsstemsfromtheircapacitytoallowefficientsharingorspreadingofriskamongmanyinvestors,whocanbuyandselltheirownershipsharesonliquidstockexchangesandletprofessionalmanagersrunthecompanyonbehalfofshareholders.Thisrisksharingstemsfrom

A.

theliquidityoftheshares.

B.

thelimitedliabilityofshareholders.

C.

thelimitedliabilityofbondholders.

D.

thelimitedabilityofshareholders.

6.

Inapubliccompanywithdiffusedownership,theboardofdirectorsisentrustedwith

A.

monitoringtheauditorsandsafeguardingtheinterestsofshareholders.

B.

monitoringtheshareholdersandsafeguardingtheinterestsofmanagement.

C.

monitoringthemanagementandsafeguardingtheinterestsofshareholders.

D.

noneoftheabove

7.

Thekeyweaknessofthepubliccorporationis

A.

toomanyshareholders,whichmakesitdifficulttomakecorporatedecision.

B.

relativelyhighcorporateincometaxrates.

C.

conflictsofinterestbetweenmanagersandshareholders.

D.

conflictsofinterestsbetweenshareholdersandbondholders.

8.

Whencompanyownershipisdiffuse,

A.

a"freerider"problemdiscouragesshareholderactivism.

B.

thelargenumberofshareholdersensuresstrongmonitoringofmanagerialbehaviorbecausewithalargeenoughgroup,there'salmostalwayssomeonewhowilltoincurthecostsofmonitoringmanagement.

C.

fewshareholdershaveastrongenoughincentivetoincurthecostsofmonitoringmanagement.

D.

botha)andc)arecorrect

9.

Inmanycountrieswithconcentratedownership

A.

theconflictsofinterestbetweenshareholdersandmanagersareworsethanincountrieswithdiffuseownershipoffirms.

B.

theconflictsofinterestaregreaterbetweenlargecontrollingshareholdersandsmalloutsideshareholdersthanbetweenmanagersandshareholders.

C.

theconflictsofinterestaregreaterbetweenmanagersandshareholdersthanbetweenlargecontrollingshareholdersandsmalloutsideshareholders.

D.

corporateformsofbusinessorganizationwithconcentratedownershiparerare.

10.

Inwhatcountrydothethreelargestshareholderscontrol,onaverage,about60percentofthesharesofapubliccompany?

A.

UnitedStates

B.

Canada

C.

GreatBritain

D.

Italy

11.

Thepubliccorporation

A.

isjointlyownedbya(potentially)largenumberofshareholders.

B.

offersshareholderslimitedliability.

C.

separatestheownershipandcontrolofafirm'sassets.

D.

alloftheabove

12.

Thekeystrengthsofthepubliccorporationis/are

A.

theircapacitytoallowefficientrisksharingamongmanyinvestors.

B.

theircapacitytoraiselargeamountsoffundsatrelativelylowcost.

C.

theircapacitytoconsolidatedecision-making.

D.

alloftheabove

13.

Thecentralissueofcorporategovernanceis

A.

howtoprotectcreditorsfrommanagersandcontrollingshareholders.

B.

howtoprotectoutsideinvestorsfromthecontrollinginsiders.

C.

howtoalleviatetheconflictsofinterestbetweenmanagersandshareholders.

D.

howtoalleviatetheconflictsofinterestbetweenshareholdersandbondholders.

14.

Intheory,

A.

managersarehiredbytheshareholdersattheannualstockholdersmeeting.Ifthemanagersturninabadyear,newonesgethired.

B.

shareholdershirethemanagerstooverseetheboardofdirectors.

C.

managersarehiredbytheboardofdirectors;theboardisaccountabletotheshareholders.

D.

noneoftheabove

15.

Intherealityofcorporategovernanceattheturnofthiscentury,

A.

boardsofdirectorsareoftendominatedbymanagement-friendlyinsiders.

B.

atypicalboardofdirectorsoftenhasrelativelyfewoutsidedirectorswhocanindependentlyandobjectivelymonitorthemanagement.

C.

managersofonefirmoftensitontheboardsofotherfirms,whosemanagersareontheboardofthefirstfirm.Duetotheinterlockingnatureoftheseboards,therecanexistacultureof"I'lloverlookyourproblemsifyouoverlookmine."

D.

alloftheabovehavebeentruetoagreaterorlesserextentintherecentpast.

16.

Thestrongestprotectionforinvestorsisprovidedby

A.

Englishcommonlawcountries,suchasCanada,theUnitedStates,andtheU.K.

B.

Frenchcivillawcountries,suchasBelgium,Italy,andMexico.

C.

aweakboardofdirectors.

D.

socializedfirms.

17.

Thepubliccorporationhasakeyweakness:

A.

theconflictsofinterestbetweenbondholdersandshareholders.

B.

theconflictsofinterestbetweenmanagersandbondholders.

C.

theconflictsofinterestbetweenstakeholdersandshareholders.

D.

theconflictsofinterestbetweenmanagersandshareholders.

18.

Theseparationofthecompany'sownershipandcontrol,

A.

isespeciallyprevalentinsuchcountriesastheUnitedStatesandtheUnitedKingdom,wherecorporateownershipishighlydiffused.

B.

isespeciallyprevalentinsuchcountriesastheItalyandMexico,wherecorporateownershipishighlyconcentrated.

C.

isarationalresponsetotheagencyproblem.

D.

noneoftheabove

19.

IntheUnitedStates,managersarelegallyboundbythe"dutyofloyalty"to

A.

theboardofdirectors.

B.

totheshareholders.

C.

tothebondholders.

D.

tothegovernment.

20.

IntheUnitedStates,managersareboundbythe"dutyofloyalty"toservetheshareholders.

A.

Thisisanethical,notlegal,obligation.

B.

Thisisalegalobligation.

C.

Thisisonlyamoralobligation;therearenopenalties.

21.

OutsidetheUnitedStatesandtheUnitedKingdom,

A.

concentratedownershipofthecompanyismoretheexceptionthantherule.

B.

diffusedownershipofthecompanyismoretheexceptionthantherule.

C.

partnershipsaremoreimportantthancorporations.

D.

noneoftheabove

22.

Acompletecontractbetweenshareholdersandmanagers

A.

wouldspecifyexactlywhatthemanagerwilldoundereachofallpossiblefuturecontingencies.

B.

wouldbeanexpensivecontracttowriteandaveryexpensivecontracttomonitor.

C.

wouldeliminateanyconflictsofinterest(andmanagerialdiscretion).

D.

alloftheabove

23.

Whyisitrationaltomakeshareholders"weak"bygivingcontroltothemanagersofthefirm?

A.

Thismayberationalwhenshareholdersmaybeneitherqualifiednorinterestedinmakingbusinessdecisions.

B.

Thismayberationalsincemanyshareholdersfinditeasiertoselltheirsharesinanunderperformingfirmthantomonitorthemanagement.

C.

Thismayberationaltotheextentthatmanagersareanswerabletotheboardofdirectors.

D.

Alloftheaboveareexplanationsfortheseparationofownershipandcontrol.

24.

Freecashflowrefersto

A.

afirm'scashreserveinexcessoftaxobligation.

B.

afirm'sfundsinexcessofwhat'sneededforundertakingallprofitableprojects.

C.

afirm'scashreserveinexcessofinterestandtaxpayments.

D.

afirm'sincometaxrefundthatisduetointerestpaymentsonborrowing.

25.

Theinvestorssupplyfundstothecompanybutarenotinvolvedinthecompany'sdailydecisionmaking.Asaresult,manypubliccompaniescometohave

A.

strongshareholdersandweakmanagers.

B.

strongmanagersandweakshareholders.

C.

strongmanagersandstrongshareholders.

D.

weakmanagersandweakshareholders.

26.

Theagencyproblemreferstothepossibleconflictsofinterestbetween

A.

self-interestedmanagersasprincipalsandshareholdersofthefirmwhoaretheagents.

B.

altruisticmanagersasagentsandshareholdersofthefirmwhoaretheprincipals.

C.

self-interestedmanagersasagentsandshareholdersofthefirmwhoaretheprincipals.

D.

dutifulmanagersasprincipalsandshareholdersofthefirmwhoaretheagents.

27.

Self-interestedmanagersmaybetemptedto

A.

indulgeinexpensiveperquisitesatcompanyexpense.

B.

adoptantitakeovermeasuresfortheircompanytoensuretheirpersonaljobsecurity.

C.

wastecompanyfundsbyundertakingunprofitableprojectsthatbenefitthemselvesbutnotshareholders.

D.

alloftheabovearepotentialabusesthatself-interestedmanagersmaybetemptedtovisituponshareholders.

28.

Supposeinordertodefraudtheshareholders,amanagersetsupanindependentcompanythatheownssellsthemaincompany'soutputtothiscompany.Hewouldbetemptedtosetthetransferprice

A.

belowmarketprices.

B.

abovemarketprices.

C.

atthemarketprice.

D.

inaccordancewithGAAP.

29.

Supposeinordertodefraudtheshareholders,amanagersetsupanindependentcompanythatheownsbuysoneofthemaincompany'sinputsofproductionfromthiscompany.Hewouldbetemptedtosetthetransferprice

A.

belowmarketprices.

B.

abovemarketprices.

C.

atthemarketprice.

D.

inaccordancewithGAAP.

30.

Whydomanagerstendtoretainfreecashflow?

A.

Managersareinthebestpositiontodecidethebestuseofthosefunds.

B.

Thesefundsareneededforundertakingprofitableprojectsandtheissuecostsarelessthannewissuesofstocksorbonds.

C.

Managersmaynotbeactingintheshareholdersbestinterest,andforavarietyofreasons,wanttousethefreecashflow.

D.

Noneoftheabove

31.

Managerialentrenchmenteffortsareclearsignsoftheagencyproblem.Theyinclude

A.

anti-takeoverdefenses.

B.

poisonpills.

C.

changesinthevotingprocedurestomakeitmoredifficultforthefirmtobetakenover.

D.

alloftheabove

32.

Inhigh-growthindustrieswherecompanies'internallygeneratedfundsfallshortofprofitableinvestmentopportunities,

A.

managersarelesslikelytowastefundsinunprofitableprojects.

B.

managersaremorelikelytowastefundsinunprofitableprojects.

33.

Theagencyproblemtends

A.

tobemoreseriousinfirmswithfreecashflows.

B.

tobemoreseriousinfirmswithexcessiveamountsofexcesscash.

C.

tobelessseriousinfirmswithfewnumbersofshareholders.

D.

alloftheabove

34.

Inthegraphatright,X,Y,andZrepresent

A.

entrenchment,alignment,entrenchment.

B.

alignment,entrenchment,alignment.

C.

misalignmentandalignment.

D.

agencycostsofdebtandequity.

35.

Inthegraphatright,forFortune500companies,X,Yare

A.

5%and25%.

B.

15%and50%.

C.

50%and75%.

D.

Noneoftheabove

36.

Whichofthefollowingistrueregardingleveragedbuy-outs(LBOs)?

A.

LBOsinvolvemanagersorbuyoutpartnersacquiringcontrollinginterestsinpubliccompanies,usuallyfinancedbyheavyborrowing.

B.

ConcentratedownershipandhighlevelofdebtassociatedwithLBOsarethemechanismforsolvingtheagencyproblem.

C.

LBOsimproveacompany'sfreecashflowandthisisthemechanismbywhichtheycansolvetheagencyproblem.

D.

Botha)andb)

37.

Tobin'sQis

A.

theratioofthemarketvalueofcompanyassetstothereplacementcostsoftheassets.

B.

ameanstofindovervaluedstocks:ifQishighitmeansthatthecosttoreplaceafirm'sassetsisgreaterthanthevalueofitsstock.

C.

Thesameastheprice-to-bookratio.

D.

Botha)andb)arecorrect

38.

Itisimportantforsocietyasawholetosolvetheagencyproblem,sincetheagencyproblem

A.

leadstowasteofscarceresources.

B.

hamperscapitalmarketfunctions.

C.

retardseconomicgrowth.

D.

alloftheabove

39.

IntheU.S.,thechiefroleoftheboardofdirectorsis

A.

tohirethemanagementteam.

B.

todecideontheannualcapitalbudget.

C.

todesignaneffectiveincentivecompatiblecompensationschemeforthemselves.

D.

noneoftheabove

40.

IntheUnitedKingdom,themajorityofpubliccompanies

A.

voluntarilyabidebytheCodeofBestPracticeoncorporategovernance.

B.

arecompelledbylawtoabidebytheCodeofBestPracticeoncorporategovernance.

C.

donotabidebytheCodeofBestPracticeoncorporategovernance.

41.

InGermanythecorporateboardis

A.

legallychargedwithrepresentingtheinterestsofshareholdersexclusively.

B.

legallychargedwithlookingaftertheinterestsofstakeholders(e.g.,workers,creditors,etc.)ingeneral,notjustshareholders.

C.

legallychargedasasupervisoryboardonly.

D.

legallychargedasamanagementboardonly.

42.

IntheUnitedStates

A.

boardsofdirectorsarelegallyresponsibleforrepresentingtheinterestsoftheshareholders.

B.

duetothediffusedownershipstructureofthepubliccompany,managementoftengetstochooseboardmemberswhoarelikelytobefriendlytomanagement.

C.

thereisacorrelationbetweenunderperformingfirmsandboardsofdirectorswhoarenotfullyindependent.

D.

alloftheabovearetrue,intheUnitedStates.

43.

IntheUnitedStates,itisnotuncommonforthesamepersontoserveasbothCEOandchairmanoftheboard.

A.

Thissituationmustnothavemuchconflictofinterestsinceitiscommon.

B.

Thissituationhasabuilt-inconflictofinterest.

C.

Thisisonlylegalifthatindividualownsacontrollingnumberofsharesinthefirm.

D.

Noneoftheabove.

44.

SupposeyouaretheCEOofcompanyA,andyouserveontheboardofcompanyB,whiletheCEOofBisonyourboard.

A.

Thisisapotentialconflictofinterestforbothparties.

B.

Thisisnormalandevenadesirablesituationsinceitallowsforefficientinformationsharingbetweenthefirms.

C.

Thereisapotentialconflictfortheshareholdersofthetwofirms.

D.

Alloftheabovearetrue.

45.

IntheUnitedStates,itiswelldocumentedthat

A.

boardsdominatedbytheirchiefexecutivesarepronetotrouble.

B.

publicscrutinycanhelpimprovecorporategovernance.

C.

aspublicfirmsimprovetheircorporategovernance,thestockpricegoesup.

D.

alloftheabove

46.

Theboardofdirectorsmaygrantstockoptionstomanagers.Theseare

A.

calloptions.

B.

putoptions.

C.

noneoftheabove

47.

Ifanincentivecontractspecifiescertainaccountingperformance

A.

thataccountingnumberwilllikelybethefocusofmanagers.

B.

managerswillsetasidetheaccountinggoalifitconflictswiththegoalofmaximizingshareholderwealth.

C.

managerswillbeunabletomanipulatetheGAAP,soshareholderscanbeconfidentofhavingtheirwealthmaximized.

48.

Theboardofdirectorsmaygrantstockoptionstomanagersinorderto

A.

saveexecutivecompensationcosts.

B.

useasasubstituteforbonus.

C.

aligntheinterestofmanagerswiththatofshareholders.

D.

noneoftheabove

49.

Whendesigninganincentivecontract,

A.

itisimportantfortheboardofdirectorstosetupanindependentcompensationcommitteethatcancarefullydesignthecontractanddiligentlymonitormanager'sactions.

B.

seniorexecutivescanbetrustedtonotabuseincentivecontractsbyartificiallymanipulatingaccountingnumberssincetheauditorsshouldlookintothat.

C.

thepresenceofanyincentiveisenough,whetheritisaccountingbasedorstock-pricebased.

D.

theboardofdirectorsshouldalwaysgivethemanagersa"headsIwin,tailsyoulose"typeofoption.

50.

Concentratedownershipofapubliccompany

A.

isnormalintheUnitedStates,followingthewell-publicizedscandalsofrecentyears.

B.

isrelativelyrareintheUnitedStatesandcommoninmanyotherpartsoftheworld.

C.

leadstoafree-riderproblemwiththeminorityshareholdersrelyingonthemajority.shareholderstoassumeanundueburdeninmonitoringthemanagement.

D.

isthenorminGreatBritain.

51.

Concentratedownershipofapubliccompany

A.

canbeaneffectivewaytoalleviatetheagencyproblembetweenshareholdersandmanagers.

B.

isthenorminGreatBritain.

C.

tendstobeanineffectivewaytoalleviateconflictsofinterestbetweengroupsofshareholders.

D.

noneoftheabove

52.

Thegoalofagreateraccountingtransparency

A.

istoimposemorerulesandharsherpenaltiesfortheirviolation.

B.

istoreducetheinformationasymmetrybetweencorporateinsidersandthepublic.

C.

istodiscouragemanagerialself-dealings.

D.

answersb)andc)

53.

AccountingTransparency

A.

canonlybeachievedwhenmanagerscommittoservingontheirownauditcommittee.

B.

occurswhentheaccountingdepartmenthastranslucentcubiclesfortheirworkers.

C.

promisestoreducetheinformationasymmetrybetweencorporateinsidersandthepublic.

D.

noneoftheabove

54.

Whiledebtcanreduceagencycostsbetweenshareholdersandmanagement,

A.

debtcancreateitsownagencycosts.

B.

thisonlyhappensatextremelevelsofdebt.

C.

thisdoesnotworkforfirmsinmatureindustrieswithlargecashreserves.

D.

noneoftheabovearetrue

55.

Whiledebtcanreduceagencycostsbetweenshareholdersandmanagement,

A.

excessivedebtmayalsoinducetherisk-aversemanagerstoforgoprofitablebutriskyinvestmentprojects,causinganunderinvestmentproblem.

B.

withdebtfinancingcompaniescanmisusedebttofinancecorporateempirebuilding.

C.

botha)andb)

D.

noneoftheabove

56.

Forfirmswithfreecashflows,

A.

debtcanbeastrongermechanismthanstocksforcrediblybondingmanagerstoreleasecashflowstoinvestors.

B.

equitydividendscanbeastrongermechanismthanbondsforcrediblybondingmanagerstoreleasecashflowstoinvestors.

C.

preferredstockdividendscanbeastrongermechanismthanbondsforcrediblybondingmanagerstoreleasecashflowstoinvestors.

D.

noneoftheabove

57.

Debtcanreduceagencycostsbetweenshareholdersandmanagement,but

A.

onlyifthefirmistotallyuptoitseyeballsindebt.

B.

onlytotheextentthatthefirmcancommitallofitsfreecashflow.

C.

excessivedebtcancreateitsownagencyconflicts.

D.

debtisbestusedasacorporategovernancemechanismbyyoungcompanieswithlimitedcashreserves.

58.

Companiesdomiciledincountrieswithweakinvestorprotectioncanreduceagencycostsbetweenshareholdersandmanagement

A.

bymovingtoabettercounty.

B.

bylistingtheirstocksincountrieswithstronginvestorprotection.

C.

byvoluntarilycomplyingwiththeprovisionsoftheU.S.Sarbanes-OxleyAct.

D.

havingapressconferenceandpromisingtobenicetotheirinvestors.

59.

Benetton,anItalianclothier,islistedontheNewYorkStockExchange.

A.

ThisdecisionprovidestheirshareholderswithahigherdegreeofprotectionthanisavailableinItaly.

B.

Thisdecisioncanbeasignalofthecompany'scommitmenttoshareholderrights.

C.

ThismaymakeinvestorsbothinItalyandabroadmorewillingtoprovidecapitalandtoincreasethevalueofthepre-existingshares.

D.

Alloftheabove

60.

IntheUnitedStatesandtheUnitedKingdom,hostiletakeovers

A.

areillegal.

B.

canserveasadrasticcorporategovernancemechanismofthelastresort.

C.

reinforcethenotionthatmanagerscantaketheircontrolofthecompanyforgranted.

D.

requiremanagementapproval.

61.

Inmanycountrieshostiletakeoversarerelativelyrare.Thisissopartlybecauseof

A.

thelanguagebarrier.

B.

concentratedownershipinthesecountries.

C.

culturalvaluesandpoliticalenvironmentsdisapprovinghostilecorporatetakeovers.

D.

bothb)andc)

62.

Afterahostiletakeover

A.

theexistingmanagementteamisusuallyfired.

B.

theexistingmanagementteamisusuallyretainedatahigherwage.

C.

thetargetcompanyusuallymountsatakeoverdefense.

63.

Inahostiletakeoverattempt,thebiddertypically

A.

makesatenderoffertothetargetshareholdersatapricesubstantiallylessthantheprevailingshareprice.

B.

makesatenderoffertothetargetshareholdersattheprevailingshareprice.

C.

makesatenderoffertothetargetshareholdersatapricesubstantiallyexceedingtheprevailingshareprice.

D.

seekstomergewiththetargetcompanywithanexchangeofshares.

64.

Supposethemanagersofacompanyhavedriventhestockpricedownbecausetheyhavespenttheinvestors'moneyonlavishperquisiteslikegolfclubmemberships.

A.

Thissituationmaypromptacorporateraidertobuyupthesharesofthefirminahostiletakeover.

B.

Ifthehostiletakeoverissuccessful,themanagerswillprobablylosetheirjobsintheensuingrestructuring.

C.

Iftherestructuringissuccessful,thecorporateraidercansellhissharesataprofit.

D.

Alloftheabove

65.

Privatebenefitsofcorporatecontrolwilltendtobehigherin

A.

FrenchcivillawcountriesthaninEnglishcommonlawcountries.

B.

EnglishcommonlawcountriesthaninFrenchcivillawcountries.

C.

FrenchcivillawcountriesthaninScandinaviancivillawcountries.

D.

EnglishcommonlawcountriesthaninGermancivillawcountries.

66.

EnglishcommonlawcountriestendtoprovideastrongerprotectionofshareholderrightsthanFrenchcivillawcountriesbecause

A.

theformercountriestendtobemoredemocraticthanthelatter.

B.

theformercountriestendtoprotectpropertyrightsbetterthanthelatter.

C.

theformercountriestendtohavemoreseparationofpowerthanthelatter.

D.

alloftheabove

67.

Manycompaniesissueshareswithdifferentialvotingrights,deviatingfromtheone-shareone-voteprinciple.

A.

Byaccumulatingsuperiorvotingshares,investorscanacquirecashflowrightsexceedingcontrolrights.

B.

Thepriceofthevotingsharesisusuallytwicethepriceofthevotingshares.

C.

Byaccumulatingsuperiorvotingshares,investorscanacquirecontrolrightsexceedingcashflowrights.

D.

Noneoftheabove

68.

Studiesshowthatthequalityoflawenforcement,asmeasuredbytheruleoflawindex,willtendtobe

A.

higherinFrenchcivillawcountriesthaninEnglishcommonlawcountries.

B.

higherinEnglishcommonlawcountriesthaninScandinaviancivillawcountries.

C.

highestinScandinaviancivillawcountriesandGermancivillawcountries.

D.

highestinEnglishcommonlawcountries.

69.

SupposeMr.Leeandhisrelativeshold30%ofsharesoutstandingofSamsungLife,whichinturnholds20%ofSamsungElectronics.WhatisthecashflowrightoftheLeefamilyinSamsungElectronics?

A.

50percent

B.

10percent

C.

20percent

D.

6percent

70.

Concentratedcorporateownershipismostprevalentin

A.

Italy.

B.

TheU.K.

C.

TheU.S.

D.

Australia.

71.

Incountrieswithconcentratedownership

A.

hostiletakeoversarequiterare.

B.

hostiletakeoversarequitecommon.

72.

Apyramidalownershipstructureisoneinwhich

A.

ashareholdercontrolsaholdingcompanythatownsacontrollingblockofanothercompany,whichinturnownscontrollinginterestsinyetanothercompany,andsoon.

B.

equitycross-holdingsamongagroupofcompanies,suchaskeiretsuandchaebolscanbeusedtoconcentrateandleveragevotingrightstoacquirecontrol.

C.

acombinationoftheseschemesmayalsobeusedtoleveragecontrolinapyramidalownershipstructure.

73.

Whatisthedifferencebetweencontrolrightsandcashflowrights?

A.

Sinceallshareholdersbenefitonlyfrompro-ratacashflows,controlrightsandcashflowrightsarethesamething.

B.

Largeinvestorsmaybeabletoderiveprivatebenefitsfromcontrol,thuscontrolrightscanexceedcashflowrights.

C.

Cashflowrightsaremoreimportantthancontrolrightssincetheonlyreasontoinvestinanythingistogeneratecash.

D.

Noneoftheabove

74.

Thekeytoextractingprivatebenefitsofcontrolthatarenotsharedbyothershareholdersonaproratabasisisto

A.

becomealargeshareholderandacquirecontrolrightsexceedingcashflowrights.

B.

buyalargeblockofnonvotingshares.

C.

sellyoursharesinatenderoffer.

D.

forcethefirmintobankruptcy.

75.

Thevotingpremium,definedasthetotalvotevalue(valueofavotetimesthenumberofvotes)asaproportionofthefirm'sequitymarketvalueisonlyabout2percentintheUnitedStatesand36percentinMexico,suggestingthatinMexico,

A.

dominantshareholdersextractsubstantialprivatebenefitsofcontrol.

B.

dominantshareholdersoverpayandthusfailtoextractsubstantialprivatebenefits.

C.

minorityshareholdersshareintheprivatebenefitsofcontrol.

D.

noneoftheabove

76.

Unlessinvestorscanderivesignificantprivatebenefitsofcontrol,

A.

theywillpaysmallpremiumsforvotingsharesovernonvotingshares.

B.

theywillpaymoderatepremiumsforvotingsharesovernonvotingshares.

C.

theywillpaysubstantialpremiumsforvotingsharesovernonvotingshares.

D.

theywillnotpaysubstantialpremiumsforvotingsharesovernonvotingshares.

77.

Theformulatocomputethevalueofthe"blockpremium"is

A.

B.

C.

D.

78.

Onewaytomeasurethevalueofprivatebenefitsofcontrol

A.

istomeasurethedifferenceinvaluebetweennon-votingsharesandvotingshares.

B.

istomeasurethevalueofthe"blockpremium"thevaluedifferencebetweenthepricepersharepaidforacontrolblockofsharesversustheexchangepriceofregularshares.

C.

botha)andb)

79.

Severalstudiesdocumenttheempiricallinkbetween

A.

weakinvestorprotectionandGDPgrowth.

B.

financialdevelopmentandeconomicgrowth.

C.

growthinGDPandconcentratedownership.

D.

noneoftheabove

80.

Financialdevelopmentcancontributetoeconomicgrowthinwhatway(s)?

A.

Financialdevelopmentenhancessavings.

B.

Financialdevelopmentchannelssavingstowardrealinvestmentsinproductivecapacities.

C.

Financialdevelopmentenhancestheefficiencyofinvestmentallocationthroughthemonitoringandsignalingfunctionsofcapitalmarkets.

D.

Alloftheabove.

81.

ComparingtheU.S.withtheGermanandJapanesecorporategovernancesystems,

A.

theU.S.systemis"marketcentered".

B.

theGermanandJapanesesystemsare"bankcentered".

C.

itseemsfairtosaythatnocountryhasaperfectsystem.

D.

alloftheabove.

82.

Theobjectiveofcorporategovernancereformshouldbewhat?

A.

Strengthentheprotectionofoutsideinvestorsfromexprop