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Corp. Governance and CSR > Contractual Governance > Flashcards

Contractual Governance Flashcards

1
Q

What does governance convergence predict according to Hansmann and Kraakman?

A

A shift towards Anglo-American corporate practices as superior.

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2
Q

Why is governance convergence considered gradual?

A

Differences in cultural, political and historical factors across nations.

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3
Q

What are the key components of contractual governance?

A

Cross-border M&A, (re)incorporation, and cross-listing.

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4
Q

What financial challenges do firms in underdeveloped markets face?

A

Dependence on equity financing and high capital costs.

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5
Q

Define the real seat principle.

A

The legal framework depends on where the firm operates.

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6
Q

Define the incorporation principle.

A

Legal framework depends on the firm’s registered jurisdiction.

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7
Q

Why do firms engage in (re)incorporation?

A

To reduce taxes, avoid restrictive laws, or optimize corporate law benefits.

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8
Q

What is the “race to the bottom” in (re) incorporation?

A

Jurisdictions competing by lowering legal standards to attract firms.

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9
Q

What makes Delaware a preferred state for incorporation?

A

Flexible laws, high firm valuations, and reduced litigation costs.

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10
Q

How does cross-listing benefit firms from weaker CG regimes?

A

It provides credibility and better shareholder protection.

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11
Q

What is an ADR in cross-listing?

A

A financial instrument allowing foreign shares to trade in the US.

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12
Q

How does cross-listing impact stock liquidity?

A

It increases investor base and market liquidity.

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13
Q

What is the “bonding hypothesis” in cross-listing?

A

Firms commit to better governance by cross-listing in regulated markets.

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14
Q

What is jurisdiction shopping?

A

Selecting a legal domicile to optimize regulatory and financial benefits.

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15
Q

How did Brexit impact corporate incorporation decisions?

A

Reduced migration to the UK due to uncertainty in legal frameworks.

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16
Q

Why do firms engage in cross-border M&A?

A

To access new markets and diversify regulatory exposure.

17
Q

What role does transparency play in cross-listing?

A

It improves governance and increases firm valuation.

18
Q

What is a lock-in agreement in IPOs?

A

A clause restricting shareholder sales post-IPO for stability.

19
Q

How does regulation affect lock-in agreements in Germany?

A

High-quality underwriters enforce stricter agreements for credibility.

20
Q

Why do firms seek lower incorporation costs?

A

To reduce administrative burden and maximize profit margins.

21
Q

What is the relationship between cross-listing and minority shareholders?

A

It enhances their protection through stricter regulations.

22
Q

How does cross-listing affect Tobin’s Q?

A

Firms achieve a 16% premium compared to non-cross listed firms.

23
Q

What drives cross-listing from emerging markets?

A

Higher governance credibility and market value.

24
Q

How do shareholders benefit from cross-border regulations?

A

By receiving consistent protections and disclosure standards.

25
Q

What challenges exist for governance convergence?

A

Resistance from entrenched legal frameworks and stakeholders.

26
Q

How does inter-jurisdiction competition influence corporate law?

A

It pushes for efficient and investor-friendly regulations.

27
Q

What was the primary focus of Goergen et al. (2006)?

A

The impact of lock-in agreements on IPO shareholder behavior.

28
Q

Why do voting premiums drop post-cross-listing?

A

Enhanced protection reduces the benefits of controlling votes.

29
Q

What is the “race to the bottom” in (re) incorporation?

A

Jurisdictions creating efficient laws to attract high-value firms.

30
Q

How does legal history impact governance evolution?

A

Historical frameworks shape path-dependent regulatory changes.

Corp. Governance and CSR (16 decks)

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