Question 1

Which one of the following statements is correct?

Accepted Answer

All the statements are correct. The bootstrapping effect describes how a bidder with weaker corporate governance can benefit from the stronger corporate governance of its target. The positive spillover effect refers to the improvement in the target's corporate governance due to being acquired by a bidder with superior corporate governance. Conversely, the negative spillover effect describes the deterioration in the target's corporate governance when taken over by a bidder with weaker corporate governance.

Question 2

Reincorporations in other states or countries are a means for companies to improve or worsen their corporate governance. Which one of the following statements is correct as to regulatory competition between states and countries?

Accepted Answer

The statement mentions that it is not clear whether regulatory competition will lead to a race to the top or to the bottom, implying that there is no clear answer or consensus on the matter. Option A and D both suggest that regulatory competition will lead to a race to the top, which contradicts the statement in the question. Option B is too narrow and only focuses on a specific group (managers) rather than considering the broader implications of regulatory competition. Therefore, the correct answer is option C.

Question 3

Which one of the following statements correctly describes the bootstrapping effect?

Accepted Answer

The bootstrapping effect refers to the bidder with weaker corporate governance adopting the corporate governance of the target company it is taking over. This is done to improve the bidder's own corporate governance practices and is one of the potential benefits of a takeover. Option A describes the target company's improvement in corporate governance, while Option D describes the benefits to the target company, neither of which is directly related to the bootstrapping effect. Option B is irrelevant to the concept of bootstrapping effect.

Question 4

Which one of the following statements is correct?

Accepted Answer

Each statement addresses different aspects of the debate on regulatory competition. A) The shareholder-exploitation hypothesis suggests that jurisdictions will lower protections to attract corporations, leading to a "race to the bottom." B) The cost-avoidance hypothesis posits that jurisdictions will increase protections to attract investors, leading to a "race to the top." C) The debate between these hypotheses is ongoing, with no conclusive evidence favoring one over the other. Therefore, all statements are correct in the context of regulatory competition discussions.

Question 5

Which one of the following statements correctly describes the bonding hypothesis?

Accepted Answer

The bonding hypothesis suggests that by subjecting themselves to more stringent regulations (often in foreign jurisdictions), large shareholders can signal their commitment not to expropriate minority shareholders. This is a way to reduce agency costs and align interests between large and small shareholders.

Question 6

Contractual corporate governance relates to ...

Accepted Answer

The answer of Contractual corporate governance relates to ...
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Question 7

Which one of the following statements is correct?

Accepted Answer

The incorporation principle holds that the law that applies to a firm is that of the country in which it is incorporated. This principle contrasts with the real seat principle, which would apply the law of the country where the firm's main office or operations are located. Therefore, statement C is correct.

Quiz 10: Contractual Corporate Governance

Which one of the following statements is correct?

Reincorporations in other states or countries are a means for companies to improve or worsen their corporate governance. Which one of the following statements is correct as to regulatory competition between states and countries?

Which one of the following statements correctly describes the bootstrapping effect?

Which one of the following statements is correct?

Which one of the following statements correctly describes the bonding hypothesis?

Contractual corporate governance relates to ...

Which one of the following statements is correct?