A) This situation may prompt a corporate raider to buy up the shares of the firm in a hostile takeover.
B) If the hostile takeover is successful, the managers will probably lose their jobs in the ensuing restructuring.
C) If the restructuring is successful, the corporate raider can sell his shares at a profit.
D) All of the above
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A) call options.
B) put options.
C) none of the above
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A) This is a potential conflict of interest for both parties.
B) This is normal and even a desirable situation since it allows for efficient information sharing between the firms.
C) There is a potential conflict for the shareholders of the two firms.
D) All of the above are true.
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A) legally charged with representing the interests of shareholders exclusively.
B) legally charged with looking after the interests of stakeholders (e.g., workers, creditors, etc.) in general, not just shareholders.
C) legally charged as a supervisory board only.
D) legally charged as a management board only.
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A) is to impose more rules and harsher penalties for their violation.
B) is to reduce the information asymmetry between corporate insiders and the public.
C) is to discourage managerial self-dealings.
D) answers b and c
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A) weak investor protection and GDP growth.
B) financial development and economic growth.
C) growth in GDP and concentrated ownership.
D) none of the above
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A) is to measure the difference in value between non-voting shares and voting shares.
B) is to measure the value of the "block premium" the value difference between the price per share paid for a control block of shares versus the exchange price of regular shares.
C) both a and b
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A) boards dominated by their chief executives are prone to trouble.
B) public scrutiny can help improve corporate governance.
C) as public firms improve their corporate governance, the stock price goes up.
D) all of the above
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A) that accounting number will likely be the focus of managers.
B) managers will set aside the accounting goal if it conflicts with the goal of maximizing shareholder wealth.
C) managers will be unable to manipulate the GAAP, so shareholders can be confident of having their wealth maximized.
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A) is the U.N.equivalent of the Sarbanes-Oxley Act.
B) is voluntary, but firms that fail to comply must explain why they choose not to comply.
C) has the force of law, like the Sarbanes-Oxley Act.
D) none of the above
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A) the language barrier.
B) concentrated ownership in these countries.
C) cultural values and political environments disapproving hostile corporate takeovers.
D) both b and c
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A) by moving to a better county.
B) by listing their stocks in countries with strong investor protection.
C) by voluntarily complying with the provisions of the U.S.Sarbanes-Oxley Act.
D) having a press conference and promising to be nice to their investors.
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A) a firm's cash reserve in excess of tax obligation.
B) a firm's funds in excess of what's needed for undertaking all profitable projects.
C) a firm's cash reserve in excess of interest and tax payments.
D) a firm's income tax refund that is due to interest payments on borrowing.
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A) 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) none of the above
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A) they will pay small premiums for voting shares over nonvoting shares.
B) they will pay moderate premiums for voting shares over nonvoting shares.
C) they will pay substantial premiums for voting shares over nonvoting shares.
D) they will not pay substantial premiums for voting shares over nonvoting shares.
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A) can be an effective way to alleviate the agency problem between shareholders and managers.
B) is the norm in Great Britain.
C) tends to be an ineffective way to alleviate conflicts of interest between groups of shareholders.
D) none of the above
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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.
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 "I'll overlook your problems if you overlook mine."
D) all of the above have been true to a greater or lesser extent in the recent past.
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A) French civil law countries than in English common law countries.
B) English common law countries than in French civil law countries.
C) French civil law countries than in Scandinavian civil law countries.
D) English common law countries than in German civil law countries.
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A) to be more serious in firms with free cash flows.
B) 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 above
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