Ch004CorporateGovernanceAroundtheWorld资料讲解.docx

Ch004CorporateGovernanceAroundtheWorld资料讲解.docx

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Ch004CorporateGovernanceAroundtheWorld资料讲解

Ch004-Corporate-Governance-Around-the-World

Eun&Resnick4e

CHAPTER4CorporateGovernanceAroundtheWorld

GovernanceofthePublicCorporation:

KeyIssues

TheAgencyProblem

RemediesfortheAgencyProblem

BoardofDirectors

InternationalFinanceinPractice:

WhenBoardsAreAllintheFamily

IncentiveContracts

ConcentratedOwnership

AccountingTransparency

Debt

OverseasStockListings

MarketforCorporateControl

LawandCorporateGovernance

ConsequencesofLaw

OwnershipandControlPattern

PrivateBenefitsofControl

CapitalMarketsandValuation

CorporateGovernanceReform

ObjectivesofReform

PoliticalDynamics

TheCadburyCodeofBestPractice

Summary

MINICASE:

Parmalat:

Europe’sEnron

1Corporategovernancecanbedefinedas:

a）theeconomic,legal,andinstitutionalframeworkinwhichcorporatecontrolandcashflowrightsaredistributedamongshareholders,managersandotherstakeholdersofthecompany

b）thegeneralframeworkinwhichcompanymanagementisselectedandmonitored

c）therulesandregulationsadoptedbyboardsofdirectorsspecifyinghowtomanagecompanies

d）thegovernment-imposedrulesandregulationsaffectingcorporatemanagement

Answer:

a）

2Whenmanagerialself-dealingsareexcessiveandleftunchecked

a）Theycanhaveseriousnegativeeffectsonsharevalues

b）Theycanimpedetheproperfunctionsofcapitalmarkets

c）TheycanimpedesuchmeasuresasGDPgrowth

d）Alloftheabove

Answer:

d）

3Corporategovernancestructure

a）Variesagreatdealacrosscountries

b）Hasbecomehomogenizedfollowingtheintegrationofcapitalmarkets

c）Hasbecomehomogenizedduetocross-listingofsharesofmanypubliccorporations

d）Noneoftheabove

Answer:

a）

GovernanceofthePublicCorporation:

KeyIssues

4Thecentralissueofcorporategovernanceis

a）howtoprotectcreditorsfrommanagersandcontrollingshareholders

b）howtoprotectoutsideinvestorsfromthecontrollinginsiders

c）howtoalleviatetheconflictsofinterestbetweenmanagersandshareholders

d）howtoalleviatetheconflictsofinterestbetweenshareholdersandbondholders

Answer:

b）

5Thekeyweaknessofthepubliccorporationis

a）toomanyshareholders,whichmakesitdifficulttomakecorporatedecision

b）relativelyhighcorporateincometaxrates

c）conflictsofinterestbetweenmanagersandshareholders

d）conflictsofinterestsbetweenshareholdersandbondholders

Answer:

c）

6Whencompanyownershipisdiffuse,

a）A“freerider”problemdiscouragesshareholderactivism

b）Thelargenumberofshareholdersensuresstrongmonitoringofmanagerialbehaviorbecausewithalargeenoughgroup,there’salmostalwayssomeonewhowilltoincurthecostsofmonitoringmanagement.

c）Fewshareholdershaveastrongenoughincentivetoincurthecostsofmonitoringmanagement.

d）a）andc）arecorrect

Answer:

d）

7Inwhatcountrydothethreelargestshareholderscontrol,onaverage,about60percentofthesharesofapubliccompany?

a）UnitedStates

b）Canada

c）GreatBritain

d）Italy

Answer:

d）

8Thepubliccorporation

a）Isjointlyownedbya（potentially）largenumberofshareholders

b）Offersshareholderslimitedliability

c）Separatestheownershipandcontrolofafirmsassets

d）Alloftheabove

Answer:

d）

9Thekeystrengthsofthepubliccorporationis/are

a）Theircapacitytoallowefficientrisksharingamongmanyinvestors

b）Theircapacitytoraiselargeamountsoffundsatrelativelylowcost

c）Theircapacitytoconsolidatedecision-making

d）Alloftheabove

Answer:

d）

10Intheory,

a）Managersarehiredbytheshareholdersattheannualstockholdersmeeting.Ifthemanagersturninabadyear,newonesgethired.

b）Shareholdershirethemanagerstooverseetheboardofdirectors.

c）Managersarehiredbytheboardofdirectors;theboardisaccountabletotheshareholders.

d）Noneoftheabove

Answer:

c）

11Inmanycountrieswithconcentratedownership

a）Theconflictsofinterestbetweenshareholdersandmanagersareworsethanincountrieswithdiffuseownershipoffirms.

b）Theconflictsofinterestaregreaterbetweenlargecontrollingshareholdersandsmalloutsideshareholdersthanbetweenmanagersandshareholders.

c）Theconflictsofinterestaregreaterbetweenmanagersandshareholdersthanbetweenlargecontrollingshareholdersandsmalloutsideshareholders

d）Corporateformsofbusinessorganizationwithconcentratedownershiparerare

Answer:

b）

12Intherealityofcorporategovernanceattheturnofthiscentury,

a）Boardsofdirectorsareoftendominatedbymanagement-friendlyinsiders.

b）Atypicalboardofdirectorsoftenhasrelativelyfewoutsidedirectorswhocanindependentlyandobjectivelymonitorthemanagement.

c）Managersofonefirmoftensitontheboardsofotherfirms,whosemanagersareontheboardofthefirstfirm.Duetotheinterlockingnatureoftheseboards,therecanexistacultureof“I’lloverlookyourproblemsifyouoverlookmine.”

d）Alloftheabovehavebeentruetoagreaterorlesserextentintherecentpast.

Answer:

d）

TheAgencyProblem

13Acompletecontractbetweenshareholdersandmanagers

a）Wouldspecifyexactlywhatthemanagerwilldoundereachofallpossiblefuturecontingencies

b）Wouldbeanexpensivecontracttowriteandaveryexpensivecontracttomonitor.

c）Wouldeliminateanyconflictsofinterest（andmanagerialdiscretion）

d）Alloftheabove

Answer:

d）

14Mostshareholdersare“weak”inthattheygiveupcontroltothemanagersofthefirm.

a）Thismayberationalwhenshareholdersmaybeneitherqualifiednorinterestedinmakingbusinessdecisions.

b）Thismayberationalsincemanyshareholdersfinditeasiertoselltheirsharesinanunderperformingfirmthantomonitorthemanagement

c）Thismayberationaltotheextentthatmanagersareanswerabletotheboardofdirectors

d）Alloftheaboveareexplanationsfortheseparationofownershipandcontrol.

Answer:

d）

15Freecashflowrefersto

a）afirm'scashreserveinexcessoftaxobligation

b）afirm'sfundsinexcessofwhat'sneededforundertakingallprofitableprojects

c）afirm'scashreserveinexcessofinterestandtaxpayments

d）afirm'sincometaxrefundthatisduetointerestpaymentsonborrowing

Answer:

b）

16Self-interestedmanagersmaybetemptedto

a）Indulgeinexpensiveperquisitesatcompanyexpense

b）Adoptantitakeovermeasuresfortheircompanytoensuretheirpersonaljobsecurity

c）Wastecompanyfundsbyundertakingunprofitableprojectsthatbenefitthemselvesbutnotshareholders

d）Alloftheabovearepotentialabusesthatself-interestedmanagersmaybetemptedtovisituponshareholders.

Answer:

d）

17Whydomanagerstendtoretainfreecashflow?

a）Managersareinthebestpositiontodecidethebestuseofthosefunds

b）Thesefundsareneededforundertakingprofitableprojectsandtheissuecostsarelessthannewissuesofstocksorbonds.

c）Managersmaynotbeactingintheshareholdersbestinterest,andforavarietyofreasons,wanttousethefreecashflow.

d）Noneoftheabove

Answer:

c）

Rationale:

Freecashflowisdefinedasfirm'sfundsinexcessofwhat'sneededforundertakingallprofitableprojects.

18Theagencyproblemtends

a）Tobemoreseriousinfirmswithfreecashflows

b）Tobemoreseriousinfirmswithexcessiveamountsofexcesscash

c）Tobelessseriousinfirmswithfewnumbersofshareholders

d）Alloftheabove

Answer:

d）

RemediesfortheAgencyProblem

BoardofDirectors

19IntheUnitedStates

a）Boardsofdirectorsarelegallyresponsibleforrepresentingtheinterestsoftheshareholders

b）Duetothediffusedownershipstructureofthepubliccompany,managementoftengetstochooseboardmemberswhoarelikelytobefriendlytomanagement.

c）Thereisacorrelationbetweenunderperformingfirmsandboardsofdirectorswhoarenotfullyindependent.

d）Alloftheabovearetrue,intheUnitedStates.

Answer:

d）

InternationalFinanceinPractice:

WhenBoardsAreAllintheFamily

20IntheUnitedStates,itiswelldocumentedthat

a）Boardsdominatedbytheirchiefexecutivesarepronetotrouble

b）Publicscrutinycanhelpimprovecorporategovernance

c）Aspublicfirmsimprovetheircorporategovernance,thestockpricegoesup

d）Alloftheabove

Answer:

d）

IncentiveContracts

21Theboardofdirectorsmaygrantstockoptionstomanagersinorderto

a）saveexecutivecompensationcosts

b）useasasubstituteforbonus

c）aligntheinterestofmanagerswiththatofshareholders

d）noneoftheabove

Answer:

c）

22Whendesigninganincentivecontract,

a）Itisimportantfortheboardofdirectorstosetupanindependentcompensationcommitteethatcancarefullydesignthecontractanddiligentlymonitormanager’sactions.

b）Seniorexecutivescanbetrustedtonotabuseincentivecontractsbyartificiallymanipulatingaccountingnumberssincetheauditorsshouldlookintothat.

c）Thepresenceofanyincentiveisenough,whetheritisaccountingbasedorstock-pricebased.

d）Theboardofdirectorsshouldalwaysgivethemanagersa“headsIwin,tailsyoulose”typeofoption.

Answer:

a）

ConcentratedOwnership

23Concentratedownershipofapubliccompany

a）IsnormalintheUnitedStates,followingthewell-publicizedscandalsofrecentyears.

b）IsrelativelyrareintheUnitedStatesandcommoninmanyotherpartsoftheworld.

c）Leadstoafree-riderproblemwiththeminorityshareholdersrelyingonthemajorityshareholderstoassumeanundueburdeninmonitoringthemanagement

d）IsthenorminGreatBritain

Answer:

b）

24Concentratedownershipofapubliccompany

a）Canbeaneffectivewaytoalleviatetheagencyproblembetweenshareholdersan