Question 1

Which one of the following statements is correct?&#10;A)Recently privatised SOEs should not have ownership by managers and employees as this reduces risk-taking behaviour necessary for their restructuring.&#10;B)The disciplinary role of debt is unlikely to work in recently privatised SOEs from emerging markets given the weak creditor protection.&#10;C)Recently privatised SOEs should be controlled by foreign investors with experience of competitive markets.&#10;D)All of the above.

Accepted Answer

The statements collectively address common issues and strategies related to the privatization of State-Owned Enterprises (SOEs), including the impact of managerial and employee ownership on risk-taking, the effectiveness of debt as a disciplinary tool in environments with weak creditor protection, and the benefits of control by foreign investors familiar with competitive markets.

Question 2

Which one of the following statements is true?&#10;A)The example of China shows that economic development requires strong investor rights.&#10;B)There is agreement that large equity markets are a necessary and sufficient condition for economic development.&#10;C)There is some disagreement across academia as to whether large equity markets are a necessary and sufficient condition for economic development.&#10;D)Large equity markets and strong investor rights are incompatible.

Accepted Answer

There is no consensus among economists about whether large equity markets alone are sufficient for economic development or if other factors, such as strong investor rights, are necessary. The example of China, which has experienced significant economic growth without a fully developed equity market, suggests that there may be alternative paths to economic development.

Question 3

Which one of the following statements is incorrect?&#10;A)Entrepreneur wealth has been associated with strong economic growth.&#10;B)Inherited wealth has been shown to have a negative effect on economic growth.&#10;C)Familism refers to strong family ties and the possible limitations these may cause for firm growth and the emergence of firms in industries that are not typically associated with family ownership.&#10;D)All of the above statements are incorrect.

Accepted Answer

All the statements provided are generally considered correct in the context of economic and sociological studies, making option D the incorrect statement.

Question 4

Which one of the following statements is correct?&#10;A)Political connections always destroy firm value.&#10;B)Business people who become politicians tend to create value for their firms.&#10;C)There is some evidence that political connections create firm value.&#10;D)Both statements B and C are correct.

Accepted Answer

Political connections can sometimes create firm value by providing firms with better access to information, resources, and favorable regulations. This is supported by empirical evidence, although the effect can vary depending on the context and the nature of the political connections. Additionally, business people who transition into politics may leverage their positions to benefit their firms, either through policy influence or enhanced networking opportunities.

Deck 9: Corporate Governance in Emerging Markets