Multinational Finance: Financial Goals and Corporate Governance

Which of the following is the "signature" clause of the Sarbanes -Oxley Act?

A. CEOs and CFOs of publicly-traded firms must vouch for the veracity of the firm's financial statements.

With shareholder wealth maximization as the manager's goal, capital may be termed

A. Impatient

Which of the following is generally NOT considered to be a viable operational goal for a firm?

A. Maintain strong local currency

Which of the following is a common operational financial objective for MNEs?

A. Maximizations of consolidated after-tax income

The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed ________.

A. corporate governance

Unsystematic risk can be defined as

B) the risk of the individual security.

If share price falls from $ 15 to $ 12 per share, and pays a dividend of $ 1 per share, what was the rate of return to shareholders?

B. -13.33%

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is ________.

B. Agency theory

Which of the following was NOT identified by the authors as a knowledge asset?

B. Foreign Macroeconomic issues

In the Anglo-American model of corporate governance, the primary goal of management is to

B. Maximize shareholder wealth

The Corporate Wealth Maximization Model

B. combines the interests and inputs of shareholders, creditors, management, employees, and society.

Privatization is a term used to describe

B. government operations that are purchased by corporations and other investors.

The Board of Directors

B. is the legal body which is accountable for the governance of the corporation.

Which of the following is a common operational financial objective for MNEs?

B. minimization of the firm's effective global tax burden

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

C. Executive management; auditors

The deliberation of the of the process demonstrated in the European-Japanese system of corporate governance has sometimes been termed ________

C. Patient capital

Anglo-American equity markets are characterized by completing ownership shares. In other parts of the world ownership is often dominated by consortiums of controlling shareholders. Which of the following is NOT an example of a common consortium of controlling shareholders?

C. US labor union

Which of the following is a common operational financial objective for MNEs?

C. correct positioning of the firm's income, cash flow, and available fund as to country and currency

Systematic risk can be defined as

C. general risk of the market

The primary operational goal for the firm is to

C. maximize the consolidated after-tax profits of the firm.

According to a recent Forrester survey, which of the following categories is the single most important cause of losses of stock value?

C. strategic mistakes

Anglo-American is defined to mean

C. the United States, United Kingdom, Canada, Australia and New Zealand.

MultiProducts, Inc. has two classes of common stock. Class A has 1 million shares with 10 votes per share. Class B has 2 million shares with 1 vote per share. If the dividends per share are equal for both class A and B stock, then Class A shareholders have ________ of the votes and ________ of the dividends.

D. 83.33%; 33.33%

Which of the following is an operational process that can destroy firm value?

D. Accounting irregularities

"Maximize corporate wealth"

D. All of the above

In finance, an efficient market is one in which

D. All of the above

It may be (is probably the case) that family owned businesses the world over out-perform their publicly traded brethren. Which of these factors is attributed to family owned firm dominance over public firms?

D. All of the above

The stakeholder capitalism model is characterized by the desire of controlling shareholders to maximize long-term return to equity just as in the shareholder wealth maximization model of corporate governance. However, stakeholder capitalism shareholders are more constrained by which of the following groups than in the shareholder wealth maximization model?

D. All of the above

Which of the following is a reason why managers act to maximize shareholder wealth in Anglo-American markets?

D. All of the above

Which of the following is NOT an important concept when distinguishing between international and domestic financial management?

D. All of the above are important distinguishing concepts

During the 1990s, rapidly increasing stock prices exposed a flaw in the shareholder wealth maximization model, the seeking of short-term value maximization. Such behavior by management is characterized by all but which of the following?

D. All of the above may be characteristics of short term value maximization.

Which of the following is not a form of direct foreign investment?

D. International trade

Under the Shareholder Wealth Maximization Goal of Corporate Governance, poor firm performance is likely to be faced with all but which of the following?

D. Prison time for executive managment

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be disappointingly small and less than expected when the legislation was enacted in 2002.

False

Non-Anglo-American markets are dominated by the "one-vote-one-share "rule.

False

Systematic risk can be eliminated through portfolio diversification.

False

The goal of all international corporations is to maximize shareholder wealth.

False

Typically, Licensing is considered to be a greater foreign investment than a Greenfield investment

False

Under the shareholder wealth maximization model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

False

Warren Buffett and his investment firm Berkshire Hathaway is an outstanding example of impatient capital investing.

False

According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

True

According to the authors, dual classes of voting stock are the norm in non-Anglo-American markets.

True

Corporate wealth maximization, also known as the stakeholder capitalism model, holds that total risk (operational and financial) is more important than just systematic risk.

True

In recent years the trend has been for markets to increase focus on the shareholder wealth form of wealth maximization.

True

In recent years there has been an increasing focus on the wealth maximization model of corporate governance and a move away from the stakeholder capitalism model among MNEs.

True

Under the stakeholder capitalism model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

True

The Shareholder Wealth Maximization Model

clearly places shareholders as the primary stakeholder.