All else equal, there is less need for monitoring of CEOs by shareholders when the firm has Question 9 options: a) more free cash flows b) one or more large external shareholders (i.e., a blockholder) c) operates in a low competition industry d) All of the above options are correct e) None of the options are correct

All else equal, there is less need for monitoring of CEOs by shareholders when the firm has Question 9 options: a) more free cash flows b) one or more large external shareholders (i.e., a blockholder) c) operates in a low competition industry d) All of the above options are correct e) None of the options are correct

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter10: Corporate Governance

Section: Chapter Questions

Problem 3MC

See similar textbooks

Similar questions

What types of firms would we expect to observe higher direct agency costs of equity, such as consuming excessive perquisites by management ? Question 7 options: a) Firms with high free cash flows b) Firms with fewer growth opportunities c) Firms with weak governance structures d) All of the above options are correct e) None of the options are correct
Which of the following statements is false? Group of answer choices a.If management does not consider the needs of the bondholders of a firm, they could end up destroying shareholder value b.If management chooses to ignore the needs of bondholders when structuring a firm, the firm can be expected to have to pay a higher interest rate on its debt c.In a perfect capital market, if a firmʹs current capital structure is not optimal, one can expect that firm to be a takeover target d.Management should focus only on the needs of a firmʹs shareholders since they are the true owners of the firm and, as such, they elect the firmʹs directors
Which of the following are negative consequences of compensating managers with stock? Question 14 options: a) Stock compensation can attenuate management shirking and risk aversion b) Stock compensation forces management to bear high levels of ﬁrm-speciﬁc risk, which cannot be diversiﬁed away c) Stock compensation allows a risk-averse manager to be assured of a minimum level of pay d) Stock compensation is less susceptible to market wide effects outside of management control
It is an axiom that may be characterized by managers making decisions that conflict with the best interest of the shareholders. a. the risk-return trade-off b. the agency problems c. the curse of competitive markets d. stockholders versus managers
Which of the following is true? 1. Shareholder activism requires the investors to exercise their voting rights. 2. Agency problem arises if the management does not hold the majority share in the firm (i.e., more than 50%). 3. Stock options and performance plans are examples of external market forces. 4. Agency costs are borne by all the stakeholders, including the shareholders.
All things equal, managerial risk aversion will have the following effect: Question options: a) CEOs will pass on NPV < 0 projects, which is an indirect agency cost b) Less diversified executives will place a lower value on riskier forms of compensation c) CEOs will prefer debt over equity financing for new projects d) CEOs will be less willing to accept underpricing at an initial public offering
Which of the following statements is/are INCORRECT? O 1) Takeover threats tends to affect managerial behavior. 2) Corporations have the double taxation problem. O 3) Compensating managers with more stock options and less cash income can reduce the conflicts of interest between bondholders and managers. O 4) Both a and c are incorrect. 5) Both b and c are incorrect.
Which one of the following factors may affect stock return but out of the CEO's control?This chould potentially be a problem when trying up the compensation scheme to stock returns/ A.Supply chain risk management B.Federal monetary policy and regulations C.The rival firm recruits the company's employees D.Tte high inflation rate announced in the last quater
What does it mean to say that managers should maximize shareholder wealth "subject to ethical constraints"? What ethical considerations might enter into decisions that result in cash flow and stock price effects that are less than they might otherwise have been?
Firms must provide the right incentives if they are to get -Select-shareholderscreditorsmanagersItem 1 to focus on long-run value maximization. Conflicts exist between managers and stockholders and between stockholders (represented by managers) and -Select-employeesdebtholderscustomersItem 2 . Managers' personal goals may compete with shareholder wealth maximization. However, managers can be motivated to act in their stockholders' best interests through (1) reasonable -Select-vacationcompensationperquisiteItem 3 packages, (2) firing of underperforming managers, and (3) the threat of hostile takeovers. If a firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover.-Select-StockholdersBondholdersItem 4 generally receive fixed payments regardless of how well the firm does, while -Select-stockholdersbondholdersItem 5 earn higher returns when the firm's earnings are higher. Investments in -Select-riskysafeItem…
The use of financial leverage by the firm has a potential impact on which of the following? (1) The risk associated with the firm's operations. (2) The risk experienced by the stockholders (3) The variability of operating income (4) The variability of net income (5) The probability of going bankrupt Group of answer choices: 1, 2, 3 1, 3, 5 3, 4, 5 2, 3, 4 2, 4, 5
Which of the following is/are true regarding payout policy to shareholders? A. Most of the time that firms announce an increase in dividends, the market reacts negatively, as this is an admission that the firm has few good investment opportunities going forward. B. Large, mature firms should return a lot of cash to shareholders because there aren’t enough good investment opportunities out there for them. C. Flexibility is one key reason why we have seen much more use of share repurchases to return cash to shareholders in the last 3 decades. D. The primary value driver for the firm is how cash is paid out, not cash generation. E. (A) and (B) F. (B) and (C) G. (C) and (D)