Deck 33: Governance and Corporate Control Around the World

Question 1

In Japan, commercial banks can own a company's stock up to:

A) 1% of the total shares
B) 5% of the total shares
C) 10% of the total shares
D) Commercial banks cannot own stocks of companies

Answer 1

5% of the total shares

Question 2

Financial markets are more important for firms to raise funds for investment in the:
I. U.S.A
II. U.K.
III. Germany

A) I only
B) II only
C) I and II only
D) II and III only

Answer 2

I and II only

Question 3

Individual investors of which of the following countries play an important role in corporate governance?

A) U.S.A.
B) U.K.
C) Japan
D) none of the above

Answer 3

U.S.A.

Question 4

In Japan inter-company financing is in the form of:

A) Term loans
B) Trade credit
C) Leasing
D) None of the above

Question 5

The total amount of financial assets in the U.K. is:

A) 327% of the GDP
B) 288% of the GDP
C) 267% of the GDP
D) none of the above

Question 6

The idea that a corporation should be run in the interests of the shareholders is embedded in the law in:
I. the U.S.A.
II. the U.K.
III. France
IV. Japan

A) I only
B) I and II only
C) III and IV only
D) II and IV only

Question 7

The total amount of financial assets in Japan is:

A) 327% of the GDP
B) 306% of the GDP
C) 286% of the GDP
D) none of the above

Question 8

The idea that a corporation's financial goal is to "maximize stockholder value" is more prevalent in:
I. the U.S.A. II) the U.K.
III. France
IV. Japan

A) I and II only
B) II and III only
C) III and IV only
D) II and IV only

Question 9

The United States has a market-based financial system because:
I. it has a large stock market
II. it has a large corporate bond market
III. it has financial institutions

A) I only
B) II only
C) II and III only
D) I and II only

Question 10

Which of the following statement(s) is(are) true about company financing in the U.S.A.?
I. The U.S.A. has a large amount of bank loans outstanding.
II. The U.S.A. has a large stock market.
III. The U.S.A. has a large bond market.

A) I only
B) II only
C) I, II and III
D) II and III only

Question 11

The following countries have legal system based on civil law tradition:
I. Germany
II. France
III. Scandinavia
IV. U.K

A) I only
B) II only
C) I, II, and III only
D) IV only

Question 12

Individual investors in the U.S.A. can play an important part in corporate governance because:
I. a large fraction of households' portfolio is held directly in equity securities
II. a large fraction of households' portfolio is held in pension funds
III. a large fraction of households' portfolio is held directly in bank deposits

A) I only
B) II only
C) III only
D) II and III only

Question 13

The legal system in the U.S.A is based on:

A) Common law tradition
B) Civil law tradition
C) Sharia tradition
D) None of the above

Question 14

In financial institution based systems, individual investors hold corporate debt and equity through the following ways:
I. directly
II. indirectly through banks
III. indirectly through insurance companies
IV. indirectly through other financial intermediaries

A) I only
B) I and II only
C) IV only
D) II, III and IV only

Question 15

Large business combinations in Japan are normally carried out through reciprocal ownership of common stock. These networks, or keiretsu, involve a large number of diversified companies centered around a large bank, industrial firm, or trading firm. One of the main benefits of this structure is argued to be:

A) The monopolistic control of economic segments
B) The reduction of financial distress costs
C) Large scale diversification that cannot be done by individual shareholders
D) Greater efficiency in management because the management skills are homogeneous even for

Question 16

The legal system in France is based on:

A) Common law tradition
B) Civil law tradition
C) Sharia tradition
D) None of the above

Question 17

Financial institutions are more important for firms to raise funds in (the):
I. U.S.A
II. Germany
III. Japan

A) I only
B) II and III only
C) III only
D) I and III only

Question 18

The total amount of financial assets in the U.S.A. is:

A) 275% of the GDP
B) 267% of the GDP
C) 236% of the GDP
D) none of the above

Question 19

The following are sources of financing for corporations:
I. Households
II. Financial institutions
III. Other corporations

A) I only
B) II only
C) III only
D) I, II, and III

Question 20

Large business combinations in Japan are carried out through reciprocal ownership of common stock. These are called:

A) Keiretsu
B) Chaebols
C) Conglomerates
D) Industrial houses

Question 21

Households, financial institutions and other firms are the main sources of funds for firms.

Question 22

Dual-class equity occurs frequently in:
I. U.S.A.
II. Brazil
III. Canada
IV. Germany
V. Sweden

A) I only
B) II only
C) I, II, III, IV, and V
D) IV and V only

Question 23

Which country has the highest percentage of widely held stock?

A) Korea
B) Singapore
C) Japan
D) Malaysia

Question 24

Firms raise funds from financial markets and from financial institutions.

Question 25

Large firms in Germany have:
I. the board of directors
II. the supervisory board
III. the management board

A) I only
B) II only
C) III only
D) II and III only

Question 26

The largest ten families in Indonesia control what percentage of all firms?

A) 58% of the outstanding shares
B) 33% of the outstanding shares
C) 25% of the outstanding shares
D) 21% of the outstanding shares

Question 27

The largest ten families in Thailand control what percentage of all firms?

A) 46% of the outstanding shares
B) 33% of the outstanding shares
C) 25% of the outstanding shares
D) 21% of the outstanding shares

Question 28

Which country has the highest percentage of state owned corporate stock?

A) Korea
B) Singapore
C) Japan
D) Malaysia

Question 29

Conglomerates can be effective in

A) the U.S.A.
B) Great Britain
C) developing economies
D) none of the above

Question 30

Direct individual investment in the equity market is relatively small around the world.

Question 31

In the United States, individual investors can play an important role in corporate governance because of well-developed democracy.

Question 32

"Effective control" of a firm requires approximately:

A) 100% ownership
B) 51% ownership
C) 50% ownership
D) 20% ownership

Question 33

The German system of corporate governance is referred to as:

A) Aufsichtsrat
B) Vorstand
C) Codetermination
D) Directoire

Question 34

A Korean conglomerate is called a:

A) Keiretsu
B) Chaebol
C) Industrial house
D) Conglomerate

Question 35

In Japan, the racketeers who demand payment in exchange for not disrupting shareholders' meetings are known as:

A) keiretsu
B) chaebols
C) benami
D) sokaiya

Question 36

The legal system in the U.S.A. and U.K. is based on civil law tradition.
FALSE

Question 37

The largest ten families in Japan control what percentage of all firms?

A) 42% of the outstanding shares
B) 33% of the outstanding shares
C) 25% of the outstanding shares
D) 2% of the outstanding shares

Question 38

A firm whose only asset is controlling blocks of shares in other firms is called:

A) a conglomerate
B) a holding company
C) a pyramid
D) Dual-class company

Question 39

The largest ten families in Taiwan control what percentage of all firms?

A) 42% of the outstanding shares
B) 33% of the outstanding shares
C) 25% of the outstanding shares
D) 18% of the outstanding shares

Question 40

Japan has bank based financial system.

Question 41

The legal systems in France, Germany and Scandinavia have evolved from common-law tradition.

Question 42

German governance seeks to include labor as a partner in making long term decisions.

Question 43

Briefly explain why large firms in Germany have two boards of directors.

Question 44

Briefly explain why a bank in Germany can own shares of a corporation while a bank in the U.S.A. cannot.

Question 45

Is the US corporate governance structure more or less responsive to shareholders than most other nations and why or why not?

Question 46

Briefly explain the term pyramid in the context of corporate control.

Question 47

In Japan, a keiretsu is a network of companies organized around a major bank.

Question 48

Briefly explain the two important legal traditions in Europe and the U.S.A.

Question 49

Conglomerates in Korea are called chaebols.

Question 50

Widely held and direct ownership of firms is common in Germany.

Question 51

What is corporate governance?

Question 52

Briefly explain the term "keiretsu."

Question 53

The largest conglomerate in India is the Tata Group.

Question 54

Under what circumstances would a conglomerate be effective?

Question 55

Japan has "main bank" system where banks and firms have long-standing relationships between them.