Corporate Finance Valuation Methods Quiz

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What is the main assumption behind the Exit Strategy?

Shareholders exercise their voting rights.

Management retains control of the company.

Institutional investors attend general meetings.

A drop in the stock price leads to a takeover by new owners. (correct)

What does the Voice strategy involve?

Attending the general meeting to scrutinize management.

Avoiding detailed scrutiny of management actions.

Selling stocks to discipline management.

Exercising voting rights to control decisions. (correct)

Why is it difficult to achieve the effect of the Exit Strategy in companies with a broad base of shareholders?

Institutional investors dominate the shareholder base.

Small individual shareholders hold the majority of shares. (correct)

The stock price remains stable.

Management retains control over voting rights.

What is one reason mentioned for why management can avoid scrutiny in the US corporate governance system?

Proxy holders making up the majority of those present. Signup and view all the answers

How can stockholders discipline management according to the text?

By exercising control rights through voting. Signup and view all the answers

What is one possible consequence of exercising the Exit Strategy?

Replacement of existing management. Signup and view all the answers

Why does the Voice strategy require shareholders to attend general meetings?

To exercise their voting rights and control decisions. Signup and view all the answers

What is a key aspect of corporate governance highlighted in the text?

Stockholders disciplining management through voting rights. Signup and view all the answers

Why is it challenging for stockholders to use the Voice strategy effectively?

Large presence of proxy holders at general meetings. Signup and view all the answers

What can be a consequence if stockholders do not effectively implement either strategy?

Decreasing company performance. Signup and view all the answers

Corporate Finance Valuation Methods Quiz

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Questions and Answers

What is the main assumption behind the Exit Strategy?

What does the Voice strategy involve?

Why is it difficult to achieve the effect of the Exit Strategy in companies with a broad base of shareholders?

What is one reason mentioned for why management can avoid scrutiny in the US corporate governance system?

How can stockholders discipline management according to the text?

What is one possible consequence of exercising the Exit Strategy?

Why does the Voice strategy require shareholders to attend general meetings?

What is a key aspect of corporate governance highlighted in the text?

Why is it challenging for stockholders to use the Voice strategy effectively?

What can be a consequence if stockholders do not effectively implement either strategy?

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