Question 1

Why is insider trading problematic?

Accepted Answer

A)  If insiders trade on their information,they cause unnecessary share price fluctuations that drive away outside investors.
B)  If insiders trade on their information,the firm is automatically fined and there will be a net loss in firm value.
C)  If insiders trade on their information,outside investors will benefit from the increase in the share price and thus there is a free rider problem.
D)  If insiders trade on their information,it increases the conflicts between shareholders and managers.
E)  If insiders trade on their information,their profits come at the expense of outside investors,making outside investors less willing to invest in corporations.

Question 2

Which monitors of a firm,other than the board of directors,are most likely to detect outright fraud?

Accepted Answer

A)  securities analysts
B)  lenders
C)  employees
D)  regulators
E)  shareholders

Question 3

The least costly solution to the conflict of interest problem is simply to monitor the firm's managers closely.

Accepted Answer

A) True 
 B)False

Question 4

What is tunnelling?

Accepted Answer

Tunnelling is a conflict of interest tha...

Question 5

Directors who are NOT employees,former employees,or family members of employees and who do not have existing or potential business relationships with the firm are called:

Accepted Answer

A)  monitoring directors.
B)  independent directors.
C)  grey directors.
D)  inside directors.
E)  unelected directors.

Question 6

What is the difference among inside,grey,and outside directors?

Accepted Answer

Inside directors are employees,former em...

Question 7

The conflict of interest that arises when a shareholder who has a controlling interest in multiple firms moves profits away from companies in which he has relatively less cash flow rights toward firms in which he has relatively more cash flow rights is called:

Accepted Answer

A)  expropriation.
B)  earnings management.
C)  tunnelling.
D)  profit mining.
E)  cash extraction.

Question 8

Directors who are employees,former employees,or family members of employees are called:

Accepted Answer

A)  managing directors.
B)  independent directors.
C)  inside directors.
D)  grey directors.
E)  unelected directors.

Question 9

How does shareholder voice serve to discipline poorly performing managers?

Accepted Answer

Shareholders can submit resolutions that...

Question 10

What is the drawback of having more independent directors on the board?

Accepted Answer

In addition to monitoring management,the...

Question 11

Which of the following countries has employees appoint some board members?

Accepted Answer

A)  Canada
B)  the United States
C)  Turkey
D)  Germany
E)  Australia

Question 12

How does a pyramid structure work?

Accepted Answer

In a pyramid structure,a family first cr...

Question 13

Which of the following best describes a pyramid structure?

Accepted Answer

A)  an investor owns less than 50% of a company,and this company owns less than 50% of another company
B)  an investor owns more than 50% of a company,and this company owns less than 50% of another company
C)  an investor owns more than 50% of a company,and this company owns more than 50% of another company
D)  an investor owns less than 50% of a company,and this company owns more than 50% of another company
E)  an investor owns less than 50% of a company,and this company owns 100% of another company

Question 14

What is the cost of aligning managers' interests with those of shareholders?

Accepted Answer

Aligning the interests of shar...

Question 15

Directors who are NOT as directly connected to the firm but who have existing or potential business relationships with the firm are called:

Accepted Answer

A)  grey directors.
B)  independent directors.
C)  advising directors.
D)  inside directors.
E)  unelected directors.

Question 16

One of the most critical inputs to the monitoring process is accurate information.

Accepted Answer

A) True 
 B)False

Question 17

What is a proxy contest?

Accepted Answer

A proxy contest takes place when shareho...

Question 18

When a board's monitoring duties have been compromised by connections or perceived loyalties to management,it is said to be:

Accepted Answer

A)  a dysfunctional board.
B)  an institutional board.
C)  a failed board.
D)  a divided board.
E)  a captured board.

Question 19

The Smith family has a 62% stake in A company and A company has a 34% stake in B company.Finally,B company has a 29% stake in C company.What percentage ownership does the Smith family have in C company?

Accepted Answer

A)  21%
B)  18%
C)  10%
D)  29%
E)  6%

Question 20

What is corporate governance?

Accepted Answer

Corporate governance is the sy...

Exam 25: Corporate Governance

How does shareholder voice serve to discipline poorly performing managers?

Correct AnswerverifiedShareholders can submit resolutions that...View AnswerShow Answer

When a board's monitoring duties have been compromised by connections or perceived loyalties to management,it is said to be:

Correct AnswerverifiedShow Answer

Which monitors of a firm,other than the board of directors,are most likely to detect outright fraud?

Correct AnswerverifiedShow Answer

The Smith family has a 62% stake in A company and A company has a 34% stake in B company.Finally,B company has a 29% stake in C company.What percentage ownership does the Smith family have in C company?

Correct AnswerverifiedShow Answer

Why is insider trading problematic?

Correct AnswerverifiedShow Answer

What is the cost of aligning managers' interests with those of shareholders?

Correct AnswerverifiedAligning the interests of shar...View AnswerShow Answer

What is corporate governance?

Correct AnswerverifiedCorporate governance is the sy...View AnswerShow Answer

One of the most critical inputs to the monitoring process is accurate information.

Correct AnswerverifiedShow Answer

What is tunnelling?

Correct AnswerverifiedTunnelling is a conflict of interest tha...View AnswerShow Answer

Directors who are NOT employees,former employees,or family members of employees and who do not have existing or potential business relationships with the firm are called:

Correct AnswerverifiedShow Answer

Directors who are NOT as directly connected to the firm but who have existing or potential business relationships with the firm are called:

Correct AnswerverifiedShow Answer

Which of the following best describes a pyramid structure?

Correct AnswerverifiedShow Answer

What is a proxy contest?

Correct AnswerverifiedA proxy contest takes place when shareho...View AnswerShow Answer

The conflict of interest that arises when a shareholder who has a controlling interest in multiple firms moves profits away from companies in which he has relatively less cash flow rights toward firms in which he has relatively more cash flow rights is called:

Correct AnswerverifiedShow Answer

What is the difference among inside,grey,and outside directors?

Correct AnswerverifiedInside directors are employees,former em...View AnswerShow Answer

The least costly solution to the conflict of interest problem is simply to monitor the firm's managers closely.

Correct AnswerverifiedShow Answer

How does a pyramid structure work?

Correct AnswerverifiedIn a pyramid structure,a family first cr...View AnswerShow Answer

Which of the following countries has employees appoint some board members?

Correct AnswerverifiedShow Answer

Directors who are employees,former employees,or family members of employees are called:

Correct AnswerverifiedShow Answer

What is the drawback of having more independent directors on the board?

Correct AnswerverifiedIn addition to monitoring management,the...View AnswerShow Answer

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Shareholders can submit resolutions that...
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Correct Answer
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Correct Answer
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Correct Answer
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Aligning the interests of shar...
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Corporate governance is the sy...
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Correct Answer
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Tunnelling is a conflict of interest tha...
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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A proxy contest takes place when shareho...
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Correct Answer
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Correct Answer
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Inside directors are employees,former em...
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Correct Answer
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Correct Answer
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In a pyramid structure,a family first cr...
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Correct Answer
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Correct Answer
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Correct Answer
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In addition to monitoring management,the...
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