A) a classified board is one in which the board members have staggered terms.
B) one tool of corporate governance is a company's tax avoidance strategy.
C) one tool of corporate governance is choosing a good investment banker.
D) a classified board is one in which the board members serve anonymously.
E) a classified board is one in which an announcement requesting applications for board members appears in the newspaper.
G) A) and B)
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A) a targeted share repurchase can be used to prevent a hostile takeover.
B) a targeted share repurchase can be used to increase the stock price if the company is undervalued.
C) anti-takeover charter provisions are good for shareholders because they prevent a raider from stealing the company for a below-market price.
D) shareholders want to prevent takeovers because they don't want the company purchased out from under them.
E) one tool of corporate governance is choosing a good investment banker.
G) C) and E)
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A) an example of an agency relationship is when the board of directors hires a ceo to run a company.
B) an example of an agency relationship is when the ceo nominates a slate of candidates to be on the board of directors.
C) an example of an agency relationship is when a supervisor hires a forklift operator.
D) the supervisor-employee relation between a production line supervisor and a production line operator is an example of an agency relationship.
E) an agency cost is the wage required to pay someone who is hired to perform a service.
G) B) and E)
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A) ceo is not the chairman of the board.
B) the board has many outsiders who have lots of other important commitments.
C) the board is as large as is possible.
D) board members are paid at a rate higher than their peers and their payment is mostly cash.
E) the board has a majority of insiders from company management on it who bring first-hand knowledge of how the company operates.
G) None of the above
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A) a manager not closing a factory that is losing money but which is in his hometown is an example of a manager-shareholder conflict.
B) management is said to be entrenched when the senior managers are consuming excessive perquisites
C) a company's matching contribution to a retirement plan is a nonpecuniary benefit.
D) company sponsorship of a local charity is an example of a nonpecuniary benefit.
E) a manager/shareholder agency conflict arises when shareholders sell their stock even though management says the stock is undervalued.
G) B) and C)
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A) in an agency relationship, the principal delegates decision-making authority to the agent.
B) in an agency relationship, the agent delegates authority to the principal.
C) an example of an agency relationship is when the ceo nominates a slate of candidates to be on the board of directors.
D) an example of an agency relationship is when a supervisor hires a forklift operator.
E) the supervisor-employee relation between a production line supervisor and a production line operator is an example of an agency relationship.
G) None of the above
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A) an example of an agency relationship is when a private individual hires a lawyer to prepare her defense in a lawsuit.
B) an example of an agency relationship is when a supervisor hires a forklift operator.
C) the supervisor-employee relation between a production line supervisor and a production line operator is an example of an agency relationship.
D) an agency cost is the wage required to pay someone who is hired to perform a service.
E) an example of an agency cost is when the board of directors pays a dividend to shareholders.
G) None of the above
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A
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B) False
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False
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B) False
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True
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A) an outside director is a board member who has no other affiliation with the company.
B) a classified board is one in which an announcement requesting applications for board members appears in the newspaper.
C) in a classified board, it is easier for dissidents to gain representation since fewer seats are up for election each year.
D) inside directors are more concerned with shareholders' interests since they are more closely concerned with firm operations.
E) since outside directors have no other connection with the firm, they are indebted to the ceo for putting them on the board
G) A) and E)
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B) False
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A) one tool of corporate governance is the threat of removing current management.
B) the commission required by the federal housing agency for a small business loan is an example of an agency cost.
C) one tool of corporate governance is the choice of how much dividends to pay.
D) corporate governance is when an officer of a corporation is elected to public office.
E) one tool of corporate governance is the location of the company headquarters.
G) A) and B)
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A) an agency relationship is when a principal hires an agent to perform a service and gives them decision-making authority.
B) an agency relationship is when a principal works for an agent.
C) in an agency relationship, the agent delegates authority to the principal.
D) an example of an agency relationship is when the ceo nominates a slate of candidates to be on the board of directors.
E) an example of an agency relationship is when a supervisor hires a forklift operator.
G) A) and D)
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A) an agency cost is the reduction in firm value due to agency conflicts.
B) an agency cost is the wage required to pay someone who is hired to perform a service.
C) an example of an agency cost is when the board of directors pays a dividend to shareholders.
D) an example of an agency cost is when an attorney hires an expert witness for a trial.
E) the commission required by the federal housing agency for a small business loan is an example ofan agency cost.
G) B) and D)
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A) personal use of the corporate jet is an example of a nonpecuniary benefit.
B) a supplier substituting a lower-quality raw material without approval is an example of asset switching.
C) an agency problem occurs when an owner/manager sells stock to an outside investor and the owner/manager fears the outside investor will consume too many perquisites.
D) an agency conflict between inside owners/managers and outside owners occurs when the outside owners sell their shares to someone else.
E) a quarter-end bonus is an example of a nonpecuniary benefit.
G) D) and E)
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A) one tool of corporate governance is monitoring management.
B) one tool of corporate governance is the choice of how much dividends to pay.
C) a company's matching contribution to a retirement plan is a nonpecuniary benefit
D) one tool of corporate governance is stock repurchases.
E) corporate governance is better when directors are also employees of the company so they know the business very well.
G) C) and E)
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A) when lenders protect themselves from the risk of asset switching, the firm's wacc can increase.
B) an example of an agency cost is when the board of directors pays a dividend to shareholders.
C) an example of an agency cost is when an attorney hires an expert witness for a trial.
D) an example of asset switching is an option to exchange one piece of real estate for another.
E) lenders can't legally prevent a firm from engaging in asset switching.
G) A) and C)
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A) an example of asset switching is borrowing money to buy equipment but instead taking it to las vegas to gamble with it.
B) the commission required by the federal housing agency for a small business loan is an example of an agency cost.
C) an example of an agency cost is the salary of the agent hired to work for the principal.
D) creditors have a claim on a firm's earning stream through the dividend payments they receive.
E) an example of asset switching is an option to exchange one piece of real estate for another.
G) A) and B)
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A) lenders will protect themselves from asset switching by charging a higher interest rate.
B) creditors have a claim on a firm's earning stream through the dividend payments they receive.
C) an example of asset switching is an option to exchange one piece of real estate for another.
D) lenders can't legally prevent a firm from engaging in asset switching.
E) firms borrowing money have greater flexibility to use that money when there are debt covenants.
G) A) and D)
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A) outside shareholders will pay less for stock if they think the original owners will consume perquisites.
B) creditors have a claim on a firm's earning stream through the dividend payments they receive.
C) an example of asset switching is an option to exchange one piece of real estate for another.
D) an agency cost is the wage required to pay someone who is hired to perform a service.
E) an example of an agency cost is when an attorney hires an expert witness for a trial.
G) D) and E)
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