Deck 3: Control Versus Ownership Rights

Question 1

Proxy votes are ...

A)votes exercised by small shareholders.
B)a thing of the past.
C)votes belonging to an investor other than the person or institution exercising them.
D)votes belonging to foreign shareholders.

Answer 1

C

Question 2

Private benefits of control are ...

A)higher in common law countries than in civil law countries.
B)the benefits to the large shareholder from controlling a firm and are not shared with the other shareholders.
C)higher in English speaking countries.
D)None of the above.

Answer 2

B

Question 3

Which one of the following statements is correct?

A)The main corporate governance problem under strong control and dispersed ownership is the expropriation of the minority shareholders by the large shareholder.
B)In the presence of weak control and concentrated ownership, the classic corporate governance problem, i.e. the principal-agent problem, prevails.
C)In the presence of weak control and dispersed ownership, the classic corporate governance problem, i.e. the principal-agent problem, prevails.
D)All of the above are correct.

Answer 3

D

Question 4

Which one of the following statements is correct?

A)The free-rider problem prevails in firms that are widely held.
B)The free-rider problem may result in a lack of shareholder monitoring of the management.
C)A large shareholder may be a solution to the free-rider problem.
D)All of the above.

Question 5

Ownership pyramids are ...

A)a way of achieving weak control with concentrated ownership.
B)a way of increasing the risk of minority shareholder expropriation.
C)some of the most visited tourist sites in the world.
D)None of the above.

Question 6

ACME Inc. has dual-class shares. Class A shares have one vote each. Class B shares do not carry any votes. Class A shares make out 50% of the total equity. ACME Inc.'s main shareholder is the Saint-John Smythe family which owns 80% of Class A shares. What is the percentage of ownership of the Saint-John Smythe family?

A)0%
B)40%
C)50%
D)80%

Question 7

The typical firm from continental Europe and most of Asia is characterised by ...

A)dispersed ownership and weak control.
B)dispersed ownership and strong control.
C)concentrated ownership and strong control.
D)concentrated ownership and weak control.

Question 8

Strong control and dispersed ownership can be achieved by ...

A)proxy votes.
B)dual-class shares.
C)ownership pyramids.
D)All of the above.