Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Question
Chapter 1, Problem 8CQ
Summary Introduction
To critically think about: The implications for corporate control and agency problems.
Statement describing the trend:
Over the last few years, the large financial institutions like pension funds and mutual funds are becoming the dominant owners of the stock in Country U. These institutions also tend to be active in the corporate affairs.
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.Identify some of the corporate scandals that took place in the recent past worldwide and discuss to what extent you think the scandals are a result of ineffective corporate governance.
Which of the following is true of the current state of financial regulation for financial institutions (FIs)?
Most banks can transfer risk on a greater scale and in more complex ways than before.
Most FIs now conduct virtual global business, reducing the influence of very large FIs.
Most global financial money and capital markets are deliberately disconnected.
Most securities exchanges have required majority ownership by resident nationals.
Which of the following best describes the process of removing or reducing of governmental
controls in the workings of the financial industry?
1) Financial deregulation.
2) Capital controls.
3) Market integration.
4) Financial contagion.
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Similar questions
- The banking crisis in Ghana in recent times has continued the concerns about corporate governance. Elsewhere, both Sarbanes-Oxley Act (US) and the Combined Code (UK) have emphasised the importance of an independent board structure. Explain why agency theorists recommend an independent board structure and with reference to the empirical studies on board structure and firm performance assess the extent to which an independent board helps solve the agency problem. Recommend and justify whether voluntary based or rule-based approach to corporate governance is appropriate for Ghana. Is corporate governance failure a contributing factor to the collapse of the financial institutions in the recent crisis in Ghana?arrow_forwardCorporate Governance: The credibility of corporate governance practices is important to cross- border portfolio investors. To explore this concept, critically evaluate the primary principles behind corporate governance reforms today. In your opinion, are these culturally specific?arrow_forwardCan anyone help? The Sarbanes-Oxley Act is a product of a series of scandals that took place around the turn of the millennium. A) Has Sarbanes-Oxley really done anything to curb fraud? B) How does the Sarbanes-Oxley Act affect U.S. companies as they compete globally?arrow_forward
- Change is always good for some participants and bad for others. Which types of financial institutions appear best situated to gain or lose from regulatory changes aimed at enhancing competition within the financial services industry?arrow_forwardIn the United States, there are various forms of economic oversight that are performed bythe government. Sometimes the government will step in when they feel the need toencourage competition in a particular industry and to break up companies that have nearlycomplete control over a particular market. What is this called when the government initiatesaction against companies that appear to have too much power?arrow_forwardWhat is the impact of a smaller number of major international accounting firms on public companies?arrow_forward
- Which of the following is a remedy for the Agency Problem in the U.S.? Shareholders have the right to elect the board of directors, which can serve as an effective check if the board remains independent of management. Shareholders have the right to overrule any managerial decisions. The U.S. government directly intervenes in company decisions to ensure shareholder interests are protected. The board of directors should always take management roles in the company.arrow_forwardOne party in Congress seems to believe that financial institutions are too highly regulated, and need to be freed to be able to compete on the world markets more efficiently. The other party seems to believe that financial institutions need to be regulated even more than they are. In any event, financial services are some of the most highly regulated industries in the country. Are financial services too highly regulated? Or not regulated enough?arrow_forwardGovernments require some banks to conduct stress tests of their financial situation. What type of financial regulation is this requirement? A. Disclosure requirements B. Assessment of risk management C. Restrictions on competition D. Consumer protectionarrow_forward
- ASSIGNMENT REVIEW QUEST IONS Direction: Answer comprehensively the following questions. 1. Why should corporate governance be in place? 2. In a large corporation, what are the two distinct groups that report to the chief financial officer? Which group is the focus of corporate finance? 3. Would our goal of maximizing the value of the equity shares be different if we were thinking about financial management in a foreign country? Why or why not?arrow_forwardInvestors usually pay more attention to corporate governance during the processes of mergers and acquisitions. Assume you are a management consultant who is advising Multi-national Enterprises (MNE) on whether to make an offer to acquire a firm in an emerging market. Based on the scenario, critically analyse any FOUR factors affecting the corporate governance performance and financial decision making of this firm.arrow_forwardWhy is corporate governance important toinvestors? Explain how each of the following isrelated to corporate governance (a) managemententrenchment, (b) hostile takeovers, (c) incentivecompensation plans, (d) greenmail, (e) poison pills,(f) strong boards of directors, (g) vesting periodsfor options, and (h) ESOPs.arrow_forward
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