Deck 5: Corporate Governance, Types of Financial Systems and Economic Growth

Question 1

Which one of these statements is correct?

A)Trust is reduced by income inequality and land property inequality.
B)Trust within a society has been shown to have a positive impact on economic growth.
C)When one adjusts for the quality of law, trust still has a positive effect on economic growth.
D)All of the above statements are correct.

Answer 1

D

Question 2

One of the theories linking financial systems to economic growth is the corporate governance theory. Which one of the following statements about this theory is correct?

A)According to this theory, large shareholders are likely to interfere too much with the running of the firm and reduce managerial efficiency.
B)The empirical evidence suggests that, contrary to the corporate governance theory, it is concentrated ownership that induces managers and employees to make firm-specific investments.
C)This theory predicts that industrial activities that require investments from the management and employees are more likely to flourish under dispersed ownership.
D)All of the above.

Answer 2

D

Question 3

Which one of the following statements is correct?

A)Horizontal associations are likely to improve economic growth as they increase trust in society.
B)There is some evidence of both a negative and positive effect of horizontal associations on economic growth and that the two effects cancel each other out.
C)Some argue that horizontal associations are likely to reduce economic growth given that they are often self-serving associations that aim at appropriating economic resources at the cost of the rest of society.
D)All of the above statements are correct.

Answer 3

D

Question 4

Which one of the following statements about firms from bank-based systems is correct?

A)These firms have less leverage as banks only tend to lend to firms with lots of fixed assets that can be used as collateral.
B)These firms have more leverage than firms from market-based-systems.
C)These firms tend to have banks as their main shareholders.
D)These firms have similar leverage, but source most of their debt financing from banks rather than bond markets.

Question 5

Which one of the following statements is correct?

A)According to the information collection theory, stock markets are better at valuing intangible assets than banks.
B)The renegotiation theory predicts that financial systems with many small banks will favour short-term investment projects rather than long-term ones.
C)The corporate governance theory predicts that industries requiring substantial investments from the management and other stakeholders will thrive under dispersed ownership.
D)All of the above.