Deck 11: Corporate Governance in Initial Public Offerings

Question 1

Which one of the following statements is correct?

A)There is evidence in favour of both the management support hypothesis and the grandstanding hypothesis for the case of VCs in IPO firms.
B)There is very little evidence about the positive impact of venture capitalists (VCs)on IPO firms.
C)There is evidence in favour of the management support hypothesis, but no evidence in favour of the grandstanding hypothesis for the case of VCs in IPO firms.
D)None of the above.

Answer 1

A

Question 2

What is grandstanding by venture capitalists (VCs)?

A)Grandstanding consists of VCs creating firm value via their support of the management and the networks they offer.
B)Grandstanding consists of young VCs improving their reputation by rushing their investee firms to the stock market, thereby creating a successful track record.
C)Grandstanding consists of VCs refusing to take a company public.
D)None of the above.

Answer 2

B

Question 3

Which one of the following statements is correct?

A)A lock-in agreement can take the form of an ownership pyramid.
B)Such an agreement consists of underpricing the IPO shares to keep control by outsiders down.
C)A lock-in agreement consists of the incumbent, selling shareholders preventing new shareholders from obtaining board seats.
D)None of the above.

Answer 3

D

Question 4

Which one of these statements about Finkelstein's dimensions of CEO power is correct?

A)Structural power always exceeds prestige power unless the CEO has significant expert power.
B)Most of the prestige power is derived from expert power whereas the reverse is not always the case.
C)Finkelstein distinguishes four dimensions of CEO power.
D)None of the above.

Question 5

Which one of the following statements is correct?

A)Stage financing consists of the financing of theatre plays.
B)Stage financing is used by venture capitalists and consists of financing that is gradually released as the firm achieves previously agreed milestones.
C)Stage financing is one of the main ways of financing in the film industry.
D)None of the above.

Question 6

Which one of the following statements is true?

A)Pre-IPO shareholders may use the size of their retained ownership as a signal of firm quality.
B)There is evidence that the incumbent shareholders use IPO underpricing to keep ownership by outsiders dispersed.
C)A lock-in agreement prevents the pre-IPO shareholders from selling their remaining shares during a certain period following the IPO.
D)All of the above are correct.

Question 7

Which one of the following statements is correct?

A)The empirical evidence suggests that there is a link between the bad long-term performance of IPOs and post-IPO ownership and control.
B)There is evidence suggesting that the evolution of ownership and control after the IPO depends on firm characteristics.
C)None of the above.
D)All of the above.

Question 8

Which one of these statements about IPO firms is correct?

A)The governance needs of IPO firms are likely to be very different from those of mature firms.
B)IPO firms are more likely to require advice rather than monitoring from their board of directors.
C)Some anti-takeover devices, such as dual-class shares, may create rather than destroy shareholder value for the case of IPO firms.
D)All of the above.