Quizz 01 Corporate Governance and Control

1 Which of the following does not relate to relevant Corporate Governance matters?
a Minority shareholders' rights
b Investor activism
c Board diversity
d Environmental and social issues related to the firm's activities
e Compensation of top executives
c f All of the above are relevant corporate governance concerns

2 The financial perspective of corporate governance focuses on all the following conflicts below
a Conflicts between shareholders and managers
b Conflicts between shareholders and debtholders
c c Labour conflicts
d Conflicts between majority and minority shareholders

3 The BCP/Millennium Bank illustration seen in class showed

a An example of good stewardship of shareholders interests by managers
b A potential example of the risks of incentive systems based on annual profits
c c A potential example of the risks of incentive systems based on annual profits coupl
d An example of investor activism

4 Empirical evidence from Jensen and Murphy (1990) suggests that

a Top management compensation is totally unrelated to performance
c b The sensitiveness of top management compensation to performance is quite low
c Managers do not receive variable bonuses contingent on meeting predefined objec
d Firm size does not influence top management compensation

5 Managers of large listed firms typically argue that

c a Markets and investors force them to produce short-term results
b They always act with a long term perspective regardless of external pressure for sh
c They would never postpone a good investment if that investment would produce a
d They feel no pressure to achieve short term results

6 Some evidence seen in class suggested that

c a Some institutional investors may incentive greater risk taking in firms where they p
b Institutional investors are typically interested in firms reducing their level of risk
c There is no evidence that institutional investors can influence greater risk taking by
d None of the above is correct

7 Some evidence seen in class suggests that it is often the case that
a Managers usually prefer to pay dividends and stock repurchases rather than engag
c b Managers usually want to avoid paying dividends and stock repurchases, prefering
c Activist investors usually favour the existence of diversification strategies on the pa
d Activist investors usually prefer that firms make investments with existing excess ca
overnance matters?

l the following conflicts below except one. Which?

erests by managers
based on annual profits
based on annual profits coupled with governance weaknesses

to performance
to performance is quite low
t on meeting predefined objectives

erm results
ess of external pressure for short-term profits
t investment would produce a short term negative impact on profits

sk taking in firms where they participate

s reducing their level of risk
nfluence greater risk taking by firm where they participate

epurchases rather than engage in large investments

d stock repurchases, prefering to engage in large investments instead
rsification strategies on the part of firm with excess cash holdings
stments with existing excess cash than wasting this in dividends or stock repurchases