Free Corporate Governance And Ethics Questions and Answers

Question 1

In order for moral hazard to occur, there must be

Accepted Answer

Asymmetry of information

Answer

The possibility of complete contracts

Answer

Symmetry of information

Answer

None of the above

Question 2

The primary issue with corporate governance outside of the US and the UK is

Accepted Answer

The expropriation of the minority shareholders by the large, controlling shareholder.

Answer

Excessive dividends

Answer

Hostile takeovers

Answer

The principal-agent problem

Question 3

The agency debt issue includes the following:

Accepted Answer

The shareholders expropriating the debtholders.

Answer

The large debtholder expropriating the minority debtholders.

Answer

Banks using proxy votes.

Answer

The debtholders forcing the managers to expropriate the shareholders.

Question 4

The mutual organizational form has which of the following advantages?

Accepted Answer

The avoidance of conflicts of interest between owners and customers.

Answer

The reduced cost of capital

Answer

The higher threat of a hostile takeover and the resulting higher pressure on the managers to perform well.

Answer

None of the above

Question 5

The "quiet life" theory proposes

Accepted Answer

Managers avoiding cognitively difficult activities

Answer

Shareholders retiring from their day jobs to live off the revenues from their investments.

Answer

Employees taking too many holidays

Answer

None of the above

Question 6

Related-party deals could include the:

Accepted Answer

Tunnelling and transfer pricing

Answer

Transactions between shareholders of the same political persuasion

Answer

Managers becoming entrenched

Answer

None of the above

Question 7

Which of the subsequent assertions is true?

Accepted Answer

German banks assume a much more important role as providers of finance and management support in small- and medium-sized enterprises than in other countries.

Answer

The German corporate governance system is not any different from the UK or US system in terms of the role of banks.

Answer

Banks never assumed an important role in the German corporate governance system.

Answer

Germany is not a bank-based system. This is just a myth.