Question 1

Under the stakeholder capitalism model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

Accepted Answer

In the stakeholder capitalism model, long-term or loyal stockholders are considered to have a deeper interest in the company's success and therefore should have more influence on corporate strategy than transient portfolio investors who may only be focused on short-term gains.

Question 2

The stakeholder capitalism model is characterized by the desire of controlling shareholders to maximize long-term return to equity just as in the shareholder wealth maximization model of corporate governance. However, stakeholder capitalism controlling shareholders are more constrained by which of the following groups than in the shareholder wealth maximization model?

Accepted Answer

D

Question 3

Warren Buffett and his investment firm Berkshire Hathaway is an outstanding example of impatient capital investing.

Accepted Answer

Warren Buffett and Berkshire Hathaway are known for their patient capital investing strategy, where they focus on long-term investments and holding onto their positions for extended periods of time.

Question 4

Which of the following is a common operational financial objective for MNEs?

Accepted Answer

Correct positioning of the firm's income, cash flow, and available funds as to country and currency is a common operational financial objective for MNEs. This involves managing currency risks, optimizing cash flow, and seeking out favorable tax laws and other financial regulations in different countries. Maximization of interest expense, minimization of revenues from other countries, and minimization of total assets held in foreign locations are not common operational financial objectives for MNEs.

Question 5

Under the shareholder wealth maximization model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

Accepted Answer

The answer of Under the shareholder wealth maximization model of...

Question 6

Anglo-American equity markets are characterized by widespread ownership of shares. In other parts of the world ownership is often dominated by consortiums of controlling shareholders. Which of the following is NOT an example of a common consortium of controlling shareholders?

Accepted Answer

Japanese keiretsus and South Korean chaebols are both examples of consortiums of controlling shareholders in their respective countries. However, U.S. labor unions do not typically hold significant ownership stakes in companies and do not function as controlling consortiums in the same way as keiretsus and chaebols.

Question 7

Which of the following is a common operational financial objective for MNEs?

Accepted Answer

Maximization of consolidated after-tax income is a common operational financial objective for MNEs as it helps in achieving higher profitability and growth for the company.

Question 8

In the Anglo-American model of corporate governance, the primary goal of management is to

Accepted Answer

In the Anglo-American model of corporate governance, the primary goal of management is to maximize shareholder wealth. This means that decisions made by management should ultimately benefit the shareholders, who have invested their money in the company with the expectation of earning a return. While other goals such as minimizing costs and risk may also be important, they are typically secondary to the goal of maximizing shareholder wealth.

Question 9

During the 1990s, rapidly increasing stock prices exposed a flaw in the shareholder wealth maximization model, the seeking of short-term value maximization. Such behavior by management is characterized by all but which of the following?

Accepted Answer

All of the listed characteristics may be exhibited in short-term value maximization, as management may prioritize immediate gains to boost stock prices instead of long-term sustainability and growth.

Question 10

Anglo-American is defined to mean

Accepted Answer

Anglo-American refers to the English-speaking countries of the United States, United Kingdom, Canada, Australia and New Zealand.

Question 11

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be disappointingly small and less than anticipated when the legislation was enacted in 2002.

Accepted Answer

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be larger than anticipated when the legislation was enacted in 2002.

Question 12

It may be (is probably the case) that family owned businesses the world over out-perform their publicly traded brethren. Which of these factors is attributed to family owned firm dominance over public firms?

Accepted Answer

Family owned businesses are known for their focus on the long-term, as they are more likely to prioritize the success and sustainability of the business over short-term profits. They also tend to stick to their core business, as they have a deeper understanding and connection to the industry. Finally, family owned businesses have fewer agency problems because the owners and managers are often the same people, reducing the potential for conflicts of interest. These factors combined contribute to the out-performance of family owned businesses compared to publicly traded firms.

Question 13

Which of the following is a common operational financial objective for MNEs?

Accepted Answer

Minimizing the firm's effective global tax burden is a common operational financial objective for MNEs as it helps to increase profitability by reducing the tax burden on the company's income. This is typically done through tax planning strategies such as transfer pricing and locating subsidiaries in countries with lower tax rates. Maximizing interest expense, minimizing revenues from other countries, and minimizing total assets held in foreign locations are not common operational financial objectives for MNEs.

Question 14

In recent years there has been an increasing focus on the wealth maximization model of corporate governance and a move away from the stakeholder capitalism model among MNEs.

Accepted Answer

This statement is true. In recent years, there has been a shift towards prioritizing shareholder value over the interests of other stakeholders, such as employees or the broader community, among some multinational corporations. This is reflected in the rise of the wealth maximization model of corporate governance, which emphasizes the importance of maximizing shareholder returns, and a move away from the stakeholder capitalism model, which posits that companies should balance the interests of various stakeholders in their decision-making.

Question 15

In finance, an efficient market is one in which

Accepted Answer

An efficient market is characterized by all of the given options: prices are assumed to reflect all available information and thus are considered correct (A), they adjust quickly to new information (B), and they are seen as effective in allocating capital within the economy (C).

Question 16

Unsystematic risk can be defined as

Accepted Answer

The answer of Unsystematic risk can be defined as
...

Question 17

Which of the following is the "signature" clause of the Sarbanes -Oxley Act?

Accepted Answer

The "signature" clause of the Sarbanes-Oxley Act requires CEOs and CFOs of publicly-traded firms to personally certify the veracity of the firm's financial statements. This provision is also known as Section 302 of the Act.

Question 18

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is ________.

Accepted Answer

Agency theory focuses on the relationship between shareholders (the principal) and management (the agent) and how to align their interests to achieve the goal of shareholder wealth maximization.

Question 19

According to an article in the French newspaper Le Figaro, French firms that are mostly privately held are out-performed by firms that are more widely held public firms. Note: In this context performance is measured by return to the owners.

Accepted Answer

The answer of According to an article in the French...

Question 20

Systematic risk can be defined as

Accepted Answer

Systematic risk refers to the risk that cannot be diversified away because it affects the entire market or economy. Therefore, it is the added risk that a firm's shares bring to a diversified portfolio. It is also known as market risk. Option A is incorrect because it includes both systematic and unsystematic risk. Option B refers to unsystematic risk, which can be diversified away. Option D is incorrect because systematic risk cannot be diversified away.

Quiz 2: Financial Goals and Corporate Governance

Under the stakeholder capitalism model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

Warren Buffett and his investment firm Berkshire Hathaway is an outstanding example of impatient capital investing.

Which of the following is a common operational financial objective for MNEs?

Under the shareholder wealth maximization model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

Anglo-American equity markets are characterized by widespread ownership of shares. In other parts of the world ownership is often dominated by consortiums of controlling shareholders. Which of the following is NOT an example of a common consortium of controlling shareholders?

Which of the following is a common operational financial objective for MNEs?

In the Anglo-American model of corporate governance, the primary goal of management is to

During the 1990s, rapidly increasing stock prices exposed a flaw in the shareholder wealth maximization model, the seeking of short-term value maximization. Such behavior by management is characterized by all but which of the following?

Anglo-American is defined to mean

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be disappointingly small and less than anticipated when the legislation was enacted in 2002.

It may be (is probably the case) that family owned businesses the world over out-perform their publicly traded brethren. Which of these factors is attributed to family owned firm dominance over public firms?

Which of the following is a common operational financial objective for MNEs?

In recent years there has been an increasing focus on the wealth maximization model of corporate governance and a move away from the stakeholder capitalism model among MNEs.

In finance, an efficient market is one in which

Unsystematic risk can be defined as

Which of the following is the "signature" clause of the Sarbanes -Oxley Act?

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is ________.

According to an article in the French newspaper Le Figaro, French firms that are mostly privately held are out-performed by firms that are more widely held public firms. Note: In this context performance is measured by return to the owners.

Systematic risk can be defined as