applied hw 2 - Siming Zhu AEM 4230 Applied Finance Homework...

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Siming Zhu AEM 4230 – Applied Finance Homework #2 September 10, 2008 1. Evaluate the arguments of those who oppose introducing the U.S system into Canada. The main arguments introduced by those who oppose introducing the U.S system to Canada are the benefits of knowledge in having the same directors on the board of the holding company as well as its subsidiaries and the difference in business structure between U.S and Canadian companies. Having directors that sit on the board of the holding company as well as the board of its subsidiaries can lead to better decisions that benefit both the company and its shareholders. These directors not only have expertise in their own fields (ex: finance, operations, etc), but they are also knowledgeable in the workings of the subsidiaries, which ultimately contributes to the earnings of the holding company and the value created for shareholders. Directors that sit together on multiple boards can also contribute positively to the corporation because they likely already have experience working together under stressful conditions to make the best decision that will create value for shareholders. Furthermore, if Canadian companies are smaller and more closely held than American companies, then the directors are more likely to have a close relationship with the firm’s executives. Under such conditions both parties will be less inclined to take actions that can potentially harm the other since there is a feeling of familiarity.
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applied hw 2 - Siming Zhu AEM 4230 Applied Finance Homework...

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