Deck 12: Behavioural Biases and Corporate Governance

Question 1

Which one of the following statements is correct?

A)Persistently high levels of testosterone seem to increase risk-taking behaviour that does not necessarily result in higher returns.
B)Persistently high levels of testosterone seem to increase risk-taking behaviour and result in higher returns.
C)Testosterone seems to explain why women are more willing to take risk.
D)None of the above.

Answer 1

A

Question 2

Which one of the following statements is correct?

A)Biased self-attribution consists attributing positive outcomes to external circumstances.
B)For overconfidence to persist, there needs to be biased self-attribution.
C)Biased self-attribution is the opposite of the fundamental attribution error.
D)None of the above.

Answer 2

B

Question 3

Randall Morck suggests that there are two types of principal-agency problems.

A)The type I agency problem is the classic principal-agent problem between the managers and shareholders.
B)Contrary to type I, the type II agency problem is caused by excessive loyalty.
C)The type I agency problem stems from a lack of loyalty of managers to their principal, the shareholders.
D)All of the above are correct.

Answer 3

D

Question 4

Which one of the following statements is correct?

A)The representative heuristic describes a bias in human behaviour which consists of drawing inferences from small samples that are too strong and doing the opposite for large samples.
B)Hubris is a type of overconfidence relating to takeovers whereby bidding managers overestimate the takeover gains.
C)Heuristic simplification consists of simplifying decision problems by using rules of thumb.
D)All of the above.

Question 5

Which one of the following statements is correct?

A)Women are more likely to engage in competitions than men.
B)Women are less risk averse when it comes to investment decisions.
C)Women tend to react less to social cues than men.
D)None of the above.

Question 6

Which one of the following statements is correct?

A)Age differences between directors do not seem to matter.
B)Age differences between directors have been shown to result in less monitoring by the board.
C)Age differences between the CEO and chairman have been shown to result in more monitoring.
D)None of the above.

Question 7

Studies investigating human behaviour suggest that ...

A)experts are less likely to be overconfident when the task/ information is opaque and complex.
B)men are less likely to be overconfident than women.
C)women are much more likely to be overconfident than men.
D)None of the above is correct.

Question 8

A decision problem suffering from a narrow framing or packaging effect means that ...

A)the way the information is presented matters and may change the decision taken.
B)there is a principal-agent problem.
C)transportation costs will be excessive.
D)it is likely that there is a pyramid of ownership creating strong control and dispersed ownership.