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23) Patient Capitalism is characterized by short-term focus by both management and investors.
24) Agency theory states that unsystematic risk can be eliminated through diversification.
25) The stakeholder capitalism model does not assume that equity markets are either efficient or
inefficient.
26) The stakeholder capitalism model assumes that only systematic risk "counts" or is a prime
concern for management.
27) Dividend yield is the change in the share price of stock as traded in the public equity
markets.
28) The goal of all international corporations is to maximize shareholder wealth.
29) Systematic risk can be eliminated through portfolio diversification.
30) A recent study shows that privately held firms use less financial leverage and enjoy lower
costs of debt than publicly traded firms.
31) In the stakeholder capitalism model (SCM) the assumption of market efficiency is absolutely
critical.
32) Describe the management objectives of a firm governed by the shareholder wealth
maximization model and one governed by the stakeholder wealth maximization model. Give an
example of how these two models may lead to different decision-making by executive
management.
33) Define patient and impatient capitalism and discuss how each may lead to different decision-
making in the shareholder wealth maximization model.
34) What are the most important distinctions that make state owned enterprises (SOEs) different
from other forms of government organizations?
1) The number of publicly traded firms:
A) peaked in the U.S. in 1996.
B) peaked worldwide in 1996.
C) increased significantly in 2009 as a result of the international financial crisis.
D) all of the above
2) Which of the following is NOT a source of new stock exchange listing additions?
A) initial public offerings
B) movements of share listings from one exchange to another
C) spinouts from larger firms
D) all of the above are sources
3) Which of the following is NOT a delisting category?
A) forced delistings
B) mergers
C) acquisitions
D) all of the above are categories of delistings
4) U.S. listings of publicly traded firms as a percentage of worldwide listings of such firms
INCREASED from 11% in 1996 to approximately 33% in 2010.
5) Companies that are delisted cease to trade.
6) Since movements between exchanges typically are a zero sum within a country, and spinouts
and bulletin board movements are few in number, real growth in listings comes from IPOs.
7) The decline of share listings in the United States has led to considerable debate over
whether these trends represent a fundamental global business shift away from the
publicly traded corporate form, or something that is more U.S.-centric combined with the
economic times. Develop an argument to why the decline happened.
1) Which of the following broad topics is NOT identified as an area to be established as good
corporate governance practice by the Organization for Economic Cooperation and Development
(OECD)?
A) protect the rights of shareholders
B) disclosure and transparency
C) the proper role of stakeholders in the governance of the firm
D) All of the above should be a concern of good corporate governance.
2) The relationship among stakeholders used to determine and control the strategic direction and
performance of an organization is termed:
A) corporate governance.
B) Anglo-American activism.
C) capital structure.
D) working capital management.
3) When discussing the structure of corporate governance, the authors distinguish between
internal and external factors. ________ is an example of an internal factor, and ________ is an
example of an external factor.
A) Equity markets; executive management
B) Debt markets; board of directors
C) Executive management; auditors
D) Auditors; regulators
4) Which of the following is NOT commonly associated with a government affiliated form of
corporate governance regime?
A) no minority influence
B) lack of transparency
C) state ownership of enterprise
D) All are associated with this type of corporate governance regime.
5) Generally speaking, which of the following is NOT considered an important factor in the
composition and control of corporate boards of directors?
A) the number of insider vs outside directors
B) the total number of directors on the board
C) the composition of the compensation committee
D) All of the above are important factors of board composition.
6) 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.
A) Smoot-Hawley
B) Humphrey-Hawkins
C) McCain-Merrill
D) Sarbanes-Oxley
7) The Sarbanes-Oxley Act, passed by the U.S. Congress in July 2002, was designed to:
A) reinstitute heavy tariffs on international trade.
B) reform corporate governance.
C) limit the Federal Reserve Board's ability to engage in the buying and selling of gold.
D) limit trade with countries deemed lenient on terrorism.
8) Anglo-American markets is a term used to describe business markets in:
A) North, Central, and South America.
B) the United States, Canada, and Western Europe.
C) the United States, United Kingdom, Canada, Australia and New Zealand.
D) the United States, France, Britain, and Germany.
9) The deliberation of the of the process demonstrated in the European-Japanese system of
corporate governance has sometimes been termed:
A) socialism.
B) impatient capital.
C) patient capital.
D) communism.
10) Which of the following is NOT an important concept when distinguishing between
international and domestic financial management?
A) corporate governance
B) culture, history, and institutions
C) political risk
D) All of the above are important distinguishing concepts.
11) The Board of Directors:
A) consists exclusively of the officers of the corporation.
B) is the legal body which is accountable for the governance of the corporation.
C) are not subject to the external forces of the marketplace.
D) is appointed by the Securities and Exchange Commission (SEC).
12) Which of the following is NOT a possible and appropriate response by shareholders
dissatisfied with existing firm management of a publicly traded firm?
A) Shareholders could sell their shares of stock.
B) Shareholders could remain quietly disgruntled.
C) Shareholders, perhaps with the help of others, could attempt to initiate a takeover.
D) All of these responses may be possible and appropriate.
13) Regarding comparative corporate governance regimes: Bank-based regimes characterized by
government influence in bank lending and a lack of transparency is often found in countries such
as Korea and Germany.
14) 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.
15) The relatively low cost of compliance with the Sarbanes-Oxley Act (SOX) has been a
surprising benefit of the act.
16) Having Anglo-Americans as members of the board of directors of a non-Anglo-American
firm signals poor corporate governance in the firm.
17) Although there are many different cultural and legal approaches used in corporate
governance worldwide, there is a growing consensus on what constitutes good corporate
governance. List and explain at least three standardized common principles of good corporate
governance.
