(International Corporate Governance 1e International Edition by Marc Goergen)
(Test Bank, Answer at the end of each Chapter)
Chapter 1
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The main corporate governance problem outside the UK and the USA is... 1) _______
A) the expropriation of the minority shareholders by the large, controlling shareholder.
B) excessive dividends.
C) the principal-agent problem.
D) hostile takeovers.
2) Which one of the following statements is correct? 2) _______
A) The German corporate governance system is not any different from the UK or US system in
terms of the role of banks.
B) 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.
C) Banks never assumed an important role in the German corporate governance system.
D) Germany is not a bank-based system. This is just a myth.
3) The agency problem of debt consists of the following: 3) _______
A) the shareholders expropriating the debtholders.
B) the debtholders forcing the managers to expropriate the shareholders.
C) the large debtholder expropriating the minority debtholders.
D) banks using proxy votes.
4) Related-party transactions may consist of... 4) _______
A) managers becoming entrenched.
B) tunnelling and transfer pricing.
C) transactions between shareholders of the same political persuasion.
D) None of the above.
5) Which one of the following statements correctly defines demutualisation? 5) _______
A) This concerns the change in control from the situation where the firm is mutually
controlled by many small shareholders to the situation where the firm is controlled by a
large shareholder.
B) The demutualisation consists of a mutual building society converting into a stock
corporation and floating on the stock exchange.
C) Both of the above are correct.
D) None of the above.
6) Which one of the following statements about evidence from research on German and UK initial 6) _______
public offerings (IPOs) is true?
A) UK IPOs end up with fewer new large shareholders six years after the IPO.
B) The initial shareholders of German IPOs manage to keep majority control longer than the
initial shareholders of UK IPOs.
C) There is a rapid separation of ownership and control in the German IPOs.
D) None of the above.
7) The following statement about the residual loss is correct. 7) _______
A) The residual loss is the difference between the monitoring costs and the bonding costs.
B) The residual loss consists of the loss in firm value caused by the agent not running the firm
in the interest of the principal.
, C) There is a residual loss if the monitoring costs exceed the bonding costs.
D) None of the above.
8) Which one of the following is a benefit of the mutual organisational form? 8) _______
A) The avoidance of conflicts of interests between owners and customers.
B) The higher threat of a hostile takeover and the resulting higher pressure on the managers to
perform well.
C) The reduced cost of capital.
D) None of the above.
9) Which one of the following statements about the theory of property rights is true? 9) _______
A) Firms should not be in the form of partnerships unless they operate in the financial sector.
B) Property rights should always confer more cash flow rights than control rights.
C) Employees should be given ownership of the firm, if their investments in their human
capital are highly specific to the firm.
D) None of the above.
10) Which of the following are examples of agency problems? 10) ______
A) Empire building
B) Investing the firm's funds in projects with a negative net present value.
C) Managers' on-the-job consumption of shareholder funds.
D) All of the above apply.
11) For moral hazard to exist, there is needs to be... 11) ______
A) asymmetry of information. B) symmetry of information.
C) the possibility of complete contracts. D) None of the above.
, 1) A
2) B
3) A
4) B
5) B
6) B
7) B
8) A
9) C
10) D
11) A
, Chapter 2
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which one of the following statements is correct? 1) _______
A) The concentration of control in the Netherlands is comparable to that in UK and US firms.
B) Most of stock-market listed firms in the USA have a shareholder with a blocking minority,
but no shareholder with a majority of the votes.
C) The concentration of control in UK firms is low, but still higher than in US firms.
D) None of the above.
2) Which one of the following statements is correct? 2) _______
A) The most important type of large shareholder across continental Europe is holding
companies and industrial companies.
B) Apart from the UK and the Netherlands, institutional investors are relatively unimportant.
C) Surprisingly, control by banks is relatively low in continental Europe.
D) All of the above are correct.
3) Compared to UK firms, German firms... 3) _______
A) experience a much more rapid separation between ownership and control after going
public.
B) are on average older when they go public.
C) experience no or at least a much less rapid separation between ownership and control after
going public.
D) Both B and C are correct.
4) Which one of the following statements is correct? 4) _______
A) Families are the most important type of large shareholder across all of Europe.
B) Institutional shareholders are the main type of shareholder in the UK.
C) Institutional shareholders are the main type of shareholder in the Netherlands.
D) Both B and C are correct.
5) Which one of the following statements is correct? 5) _______
A) Corporate control in Eastern Europe is slightly lower than in Western Europe.
B) Corporate control in the transitional economies of Eastern Europe is as concentrated as in
Western Europe.
C) Corporate control in Eastern Europe is slightly lower than in Western Europe and the
second largest shareholder is much more important.
D) None of the above.
6) Which one of the following statements is correct? 6) _______
A) Institutional investors, followed by managers, are the most important types of shareholders
in the UK.
B) Managers are the most important type of shareholder in the UK.
C) Institutional investors are the second most important type of shareholder in the UK.
D) None of the above are correct.
7) Which one of the following statements is correct? 7) _______
A) A keiretsu is a group of industrial companies with ties to a single bank which acts as the
principal lender to the group companies.
B) Zaibatsus are typically the pre-WWII form of most keiretsus.
C) The concentration of control in Japan is low compared to other Asian countries.
(Test Bank, Answer at the end of each Chapter)
Chapter 1
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The main corporate governance problem outside the UK and the USA is... 1) _______
A) the expropriation of the minority shareholders by the large, controlling shareholder.
B) excessive dividends.
C) the principal-agent problem.
D) hostile takeovers.
2) Which one of the following statements is correct? 2) _______
A) The German corporate governance system is not any different from the UK or US system in
terms of the role of banks.
B) 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.
C) Banks never assumed an important role in the German corporate governance system.
D) Germany is not a bank-based system. This is just a myth.
3) The agency problem of debt consists of the following: 3) _______
A) the shareholders expropriating the debtholders.
B) the debtholders forcing the managers to expropriate the shareholders.
C) the large debtholder expropriating the minority debtholders.
D) banks using proxy votes.
4) Related-party transactions may consist of... 4) _______
A) managers becoming entrenched.
B) tunnelling and transfer pricing.
C) transactions between shareholders of the same political persuasion.
D) None of the above.
5) Which one of the following statements correctly defines demutualisation? 5) _______
A) This concerns the change in control from the situation where the firm is mutually
controlled by many small shareholders to the situation where the firm is controlled by a
large shareholder.
B) The demutualisation consists of a mutual building society converting into a stock
corporation and floating on the stock exchange.
C) Both of the above are correct.
D) None of the above.
6) Which one of the following statements about evidence from research on German and UK initial 6) _______
public offerings (IPOs) is true?
A) UK IPOs end up with fewer new large shareholders six years after the IPO.
B) The initial shareholders of German IPOs manage to keep majority control longer than the
initial shareholders of UK IPOs.
C) There is a rapid separation of ownership and control in the German IPOs.
D) None of the above.
7) The following statement about the residual loss is correct. 7) _______
A) The residual loss is the difference between the monitoring costs and the bonding costs.
B) The residual loss consists of the loss in firm value caused by the agent not running the firm
in the interest of the principal.
, C) There is a residual loss if the monitoring costs exceed the bonding costs.
D) None of the above.
8) Which one of the following is a benefit of the mutual organisational form? 8) _______
A) The avoidance of conflicts of interests between owners and customers.
B) The higher threat of a hostile takeover and the resulting higher pressure on the managers to
perform well.
C) The reduced cost of capital.
D) None of the above.
9) Which one of the following statements about the theory of property rights is true? 9) _______
A) Firms should not be in the form of partnerships unless they operate in the financial sector.
B) Property rights should always confer more cash flow rights than control rights.
C) Employees should be given ownership of the firm, if their investments in their human
capital are highly specific to the firm.
D) None of the above.
10) Which of the following are examples of agency problems? 10) ______
A) Empire building
B) Investing the firm's funds in projects with a negative net present value.
C) Managers' on-the-job consumption of shareholder funds.
D) All of the above apply.
11) For moral hazard to exist, there is needs to be... 11) ______
A) asymmetry of information. B) symmetry of information.
C) the possibility of complete contracts. D) None of the above.
, 1) A
2) B
3) A
4) B
5) B
6) B
7) B
8) A
9) C
10) D
11) A
, Chapter 2
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which one of the following statements is correct? 1) _______
A) The concentration of control in the Netherlands is comparable to that in UK and US firms.
B) Most of stock-market listed firms in the USA have a shareholder with a blocking minority,
but no shareholder with a majority of the votes.
C) The concentration of control in UK firms is low, but still higher than in US firms.
D) None of the above.
2) Which one of the following statements is correct? 2) _______
A) The most important type of large shareholder across continental Europe is holding
companies and industrial companies.
B) Apart from the UK and the Netherlands, institutional investors are relatively unimportant.
C) Surprisingly, control by banks is relatively low in continental Europe.
D) All of the above are correct.
3) Compared to UK firms, German firms... 3) _______
A) experience a much more rapid separation between ownership and control after going
public.
B) are on average older when they go public.
C) experience no or at least a much less rapid separation between ownership and control after
going public.
D) Both B and C are correct.
4) Which one of the following statements is correct? 4) _______
A) Families are the most important type of large shareholder across all of Europe.
B) Institutional shareholders are the main type of shareholder in the UK.
C) Institutional shareholders are the main type of shareholder in the Netherlands.
D) Both B and C are correct.
5) Which one of the following statements is correct? 5) _______
A) Corporate control in Eastern Europe is slightly lower than in Western Europe.
B) Corporate control in the transitional economies of Eastern Europe is as concentrated as in
Western Europe.
C) Corporate control in Eastern Europe is slightly lower than in Western Europe and the
second largest shareholder is much more important.
D) None of the above.
6) Which one of the following statements is correct? 6) _______
A) Institutional investors, followed by managers, are the most important types of shareholders
in the UK.
B) Managers are the most important type of shareholder in the UK.
C) Institutional investors are the second most important type of shareholder in the UK.
D) None of the above are correct.
7) Which one of the following statements is correct? 7) _______
A) A keiretsu is a group of industrial companies with ties to a single bank which acts as the
principal lender to the group companies.
B) Zaibatsus are typically the pre-WWII form of most keiretsus.
C) The concentration of control in Japan is low compared to other Asian countries.
