Fin 165 Chap 2

Foreign Stock markets are frequently characterized by controlling shareholders for the individual publicly traded firms. Which of the following is NOT identified by the authors as typical controlling shareholders?
gov’t, institutions, family…..All of the above
Which is NOT typically associated with the PUBLIC ownership of business organizations?
Which of the following is NOT associated with the PRIVATE ownership of business organizations?
the government
State Owned Enterprises (SOEs)
Are a form of public ownership, are created for commercial activities rather than civil or social activities, are the dominant form of business organization in some countries….All of the above
The problems that may arise due to the separation of ownership and management in large business orgs is known as
the agency problem
Privatization is a term used to describe:
government operations that are purchased by corporations and other investors
In the US and UK stock markets are characterized by ownership of firms concentrated in the hands of a few controlling shareholders. In contrast, the rest of the world tends to have more widespread ownership of shares
State Owned Enterprises (SOEs) by their very name cannot be traded on stock exchanges bc they are government owned
In recent years the trend has been for markets to increase focus on the shareholder wealth form of wealth maximization
Non-anglo-american markets are dominated by the “one-vote-one-share” rule
According to recent research, family-owned firms in some highly developed economies typically outperform publicly owned firms.
“Maximize Corporate Wealth”
primary objective of non-anglo american, treats shareholders on par, has a broader definition than just financial wealth…all of the above
The shareholder wealth maximization model (SWM)
Clearly places shareholders as the primary stakeholder
The stakeholder capitalism model (SCM)
combines the interests and inputs of shareholders, creditors, management, employees, and society
In the Anglo-American model of corporate governance, the primary goal of management is to:
maximize shareholder welath
In finance, an efficient market is one in which
prices are assumed to be correct, prices adjust quickly, prices are the best allocators of capital……all of the above
Systematic risk can be defined as
The risk of the market in general
Unsystematic risk can be
the risk of the individual security
The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called
Agency theory
Under the SWM of corporate governance, poor firm performance is likely to be faced with all but which of the following?
Prison time for executive management
Which of the following is a reason why managers act to maximize shareholder wealth in Anglo-American markets?
stock options align the goals, market for corporate control allows outside takeover, performance based compensation for executive management….All of the above
Which is NOT true regarding the stakeholder capitalism model?
Banks and other financial institutions are less important creditors than securities markets
The stakeholder capitalism model
typically avoids flaw of impatient capital, tries to meet desires, may leave management without clear signals….all of the above
Which is NOT considered to be a viable operational goal for a firm
Maintaining a strong local currency
which of the following operational goals for the international firm may be incompatible with the others?
each of these goals may be incompatible with one or more of the others
The primary goal for the firm is to
maximize the consolidated after tax profits of the firm
Which of the following broad topics is NOT identified as an area to be established as good corporate governance practice by the Org for Economic Cooperation and Development (OECD)?
All of the above should be a concern
The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed:
corporate governance
When discussing the structure of corporate governance, the authors distinguish between internal and external factors. _______ is example of internal factor, ________ is an external factor
Executive management; auditors
Which is NOT commonly associated with the government affiliated form of corporate governance regime?
No minority influence, lack of transparency, state ownership of enterprise…..All are associated
which is NOT considered an important factor in the composition and control of corporate boards of directors?
number of insiders vs outsiders, # of directors, composition of compensation committee……..All are important factors
Signed into law on July 30,2002, the _______ Act requires CEOs of publicly traded companies to vouch for the veracity of the firm’s published financial statements.
The Sarbanes-Oxley Act, was designed to
reform corporate governance
Anglo-American markets is a term used to describe business markets in:
the US, UK, Canada, Australia, and New Zealand
The deliberation of the process demonstrated in the European Japanese system of corporate governance has sometimes been termed:
Patient Capital
With shareholder wealth maximization as the manager’s goal, capital may be termed:
Which is NOT an important concept when distinguishing between international and domestic financial management?
corporate governance, culture history and institutions, political risk…All are important
The Board of Directors
Is the legal body which is accountable for the governance of the corporation
If share price rises from $12 to $15 per share, and pays a dividend of $1 per share, what was the rate of return to shareholder?
PolyProduction Inc. has two classes of common stock. A has 5 mill shares with 10 votes, B has 5 mill with 1 vote. If dividends are equal, then Class A will have _______ of votes and ____ of individuals
90.91%, 50%
The number of publicly traded firms
peaked in the US in 1996
Which is NOT a possible and appropriate response by shareholders dissatisfied with existing firm management of a publicly traded firm?
all of these responses may be possible and appropriate
The SCM holds that total risk (operational and financial) is more important than just systematic risk
Patient Capitalism is characterized by short-term focus by both management and investors
Agency theory states that unsystematic risk can be eliminated through diversification
The stakeholder capitalism model does not assume that equity markets are either efficient or inefficient
The stakeholder capitalism model assumes that only systematic risk “counts” or is a prime concern for management
Dividend yield is the change in the share price of stock as traded in the public equity markets
Regarding comparative corporate regimes: banks-based regimes characterized by government influence in bank lending and lack of transparency is often found in countries such as Korea and German
Investor protection is typically better in countries with codified civil law (the code Napoleon) than in countries with a legal system based in English common law
The relatively low cost of compliance with the Sarbanes Oxley Act has been a surprising benefit of the Act
According to recent research, family owned firms in some highly developed economies typically outperform publicly owned firms
The goal of all international corporations is to maximize shareholder wealth
Systematic risk can be eliminated through portfolio diversification
According to the authors, dual classes of voting stock are the norm in non-Anglo-American markets
a recent study shows that privately held firms use less financial leverage and enjoy lower costs of debt than public firms
US listing of public traded firms as a percentage of worldwide listings of such firms INCREASED from 11% to 33%
Having Anglo-Americans as members of the board of directors of a non-Anglo-American firm signals poor corporate governance in the firm
In the SCM the assumption of market efficiency is absolutely critical

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