Corporate Governance Around The World

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Question 1
Free
True/False

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.

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True

False

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Question 2
Free
Multiple Choice

Corporate governance can be defined as

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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 management 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.

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Question 3
Free
Multiple Choice

When managerial self-dealings are excessive and left unchecked,

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A

they can have serious negative 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 above

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Question 4
Free
Multiple Choice

Corporate governance structure

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A

varies a great deal across countries.

B

has become homogenized following the integration of capital markets.

C

has become homogenized due to cross-listing of shares of many public corporations.

D

none of the above

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Question 5
Free
Multiple Choice

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 ownership shares on liquid stock exchanges and let professional managers run the company on behalf of shareholders.This risk sharing stems from

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A

the liquidity of the shares.

B

the limited liability of shareholders.

C

the limited liability of bondholders.

D

the limited ability of shareholders.

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Question 6
Multiple Choice

In a public company with diffused ownership,the board of directors is entrusted with

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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 of shareholders.
D
none of the above
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Question 7
Multiple Choice

The key weakness of the public corporation is

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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 between shareholders and bondholders.
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Question 8
Multiple Choice

When company ownership is diffuse,

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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, there's almost always someone who will to incur the 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 correct
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Question 9
Multiple Choice

In many countries with concentrated ownership

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A
the conflicts of interest between shareholders and managers are 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 large controlling shareholders and small outside shareholders.
D
corporate forms of business organization with concentrated ownership are rare.
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Question 10
Multiple Choice

In what country do the three largest shareholders control,on average,about 60 percent of the shares of a public company?

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A
United States
B
Canada
C
Great Britain
D
Italy
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Question 11
Multiple Choice

The public corporation

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A
is jointly owned by a (potentially) large number of shareholders.
B
offers shareholders limited liability.
C
separates the ownership and control of a firm's assets.
D
all of the above
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Question 12
Multiple Choice

The key strengths of the public corporation is/are

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A
their 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 above
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Question 13
Multiple Choice

The central issue of corporate governance is

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A
how to protect creditors from managers and 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.
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Question 14
Multiple Choice

In theory,

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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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Question 15
Multiple Choice

In the reality of corporate governance at the turn of this century,

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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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Question 16
Multiple Choice

The strongest protection for investors is provided by

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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.
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Question 17
Multiple Choice

The public corporation has a key weakness:

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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.
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Question 18
Multiple Choice

The separation of the company's ownership and control,

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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 ownership is highly concentrated.
C
is a rational response to the agency problem.
D
none of the above
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Question 19
Multiple Choice

In the United States,managers are legally bound by the "duty of loyalty" to

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A
the board of directors.
B
to the shareholders.
C
to the bondholders.
D
to the government.
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Question 20
Multiple Choice

In the United States,managers are bound by the "duty of loyalty" to serve the shareholders.

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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.
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