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InternationalFinancialManagement_5thEd_Eun_TestBank04 - 04...

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04 Student: ___________________________________________________________________________ 1. Corporate governance can be defined as: A . the economic, legal, and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers and other stakeholders of the company B. the general framework in which company management is selected and monitored C. the rules and regulations adopted by boards of directors specifying how to manage companies D. the government-imposed rules and regulations affecting corporate management 2. When managerial self-dealings are excessive and left unchecked A. They can have serious negative effects on share values B. They can impede the proper functions of capital markets C. They can impede such measures as GDP growth D. All of the above 3. Corporate governance structure A. Varies a great deal across countries B. Has become homogenized following the integration of capital markets C. Has become homogenized due to cross-listing of shares of many public corporations D. None of the above 4. The genius of public corporations stems from their capacity to allow efficient sharing or spreading of risk among many investors, who can buy and sell their ownership shares on liquid stock exchanges and let professional managers run the company on behalf of shareholders. This risk sharing stems from 5. In a public company with diffused ownership, the board of directors is entrusted with 6. The key weakness of the public corporation is 7. When company ownership is diffuse, A. A "free rider" problem discourages shareholder activism B . The large number of shareholders ensures strong monitoring of managerial behavior because with a large enough group, there's almost always someone who will to incur the costs of monitoring management. C. Few shareholders have a strong enough incentive to incur the costs of monitoring management. D. a) and c) are correct
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8. In many countries with concentrated ownership A. The conflicts of interest between shareholders and managers are worse than in countries with diffuse ownership of firms. B . The conflicts of interest are greater between large controlling shareholders and small outside shareholders than between managers and shareholders.
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