Global and Comperative Governance Flashcards
What is a free-standing firm
A listed firm that does not control other listed firms
What is a narrowly held firm
A firm that has a controlling shareholder
How does the stock price of a family Firm react to the succession
( in high-income vs low-income countries )
If succession is a family member
low: P increase high: P decreases
If succession is not family member:
low: P decreases high: P increase
What is the agency problem in Family firms
conflict of interest between a company’s management and the company’s stockholders.
The management buys more jets at cost of lower dividends to the shareholders
What is a Block Trade Premium
Is the extra price a company is sold which accounts for not only controlling shareholder’s dividends but also for the private benefits of control.
What is a widely held firm?
No big shareholders just small ones
Family firm
firm controlled by multiple family members
Dual-class premium
worth more in corrupt countries because you are also buying control
Why does the US does not have lots of family businesses?
After the great depression,
the population was averse to capitalism. Frankly, Roosevelt implemented laws to break the family business
1. Double taxes in intercorporate dividends
2. Capital Gains incentive to break up the pyramid ( if sold shares it owed from other company, got taxes )
3. Public Utilities Pyramids can only have 2 levels
4. Increase tax on inheritance
In the eyes of church, why was Coorporatism better than Capitalism ?
Corporotatism: State and Business should cooperate to form associations that guided by Church, set prices, wages,production quotas and entry regulations. (“state planning”)
- God’s perfect economy
- privity proprety is wonderful (
- princiaple of subisidiary: gives authority to workers at lower levels
Free Market Democracy: competition is spiruatilly demining.
Socialism: people being equal is a ilusion, people are at its happiest when righfully placed in a lawful hierchy guided by the church
First Corporation implemented: Italy
what is IRI ?
Each corporation is a vertically integrated industry = Association
- Each association would control prices and barries to entry
- goal: avoid competition
Why would coorporatism have lots of youth unemployment when compared with Free market economy
Association:
What is Import Subistition
find
Why does Coorporatism countries do not need stock markets
fund
What is the correlation between Coorporatism and Corruption
find
Why does countries that are historically more catholic have lower quality of living ?
find
What is it unique about France ? ( Free Market with lots of interventionism )
Most CEO’s are old burecrats.
CEO chooses the board of the directions ( enarcs and civil servants )
civil servants:
can fire and appoint at any point they want
WWII: adopted corporastism, state directed economy (due to war damage)
pros: easy collaboration between private and govenrnment
cons: vunerable to corrpution
have pyramid groups
How was the Soviet Union Finantial System ?
Central Planning:
Farms Collectivized: all business merged into one ( had to colaborate )
Government would deposit money necessary for production at company’s cash account, would take the revenue that comes from non-cash account and redistribute across all economy
- issue: companies woulf lie and over-estimate costs
- agency problem: if there is a shoratge, managers can acept bribes.
( bribe: way of geting npv > 0 )
( shortage of everything )
High Income Eastern japan
Japan:
Agency problem: Managers work very hard
Social Experiment: Many State Owned Enterprise, Finantial Crisis, solved by mass-privatization, japan’s economy and standard of living grew very strongly
WWII: USA had control over Japan’s economy for 7 years, destroyed many family businesses and implmented widly free
Keirestsu Hostile Take-over defense
Target frim issues new treasury shares, Each member of Keiretsu firm owes 2% of stock of every firm in the group, and swears it will never sell.
Weak performers, therefore not seen as reliable defense
Adult Adoptions Japan
Reason why Q ratio’s
What explain the fact that the Q ratio at Family Business blood-heirs and adopted sons are above one ( and make the stock price to increase )
huge pay to becoming the adped son of a japonese business.
Power Distance
what
individualism
Low Individualism: See more family firms
HIgh Individualism: Dont have family firms as much
South Korea
- grown the fastest
?
What is the “Big Push” Theory of Economic Develoment. Why did it failed ?
Cannot finance a company here or there, you need a big network of many connected companies. Why would you open a rail road without iron company ?
World Bank should be organized to lend money to a low income country, would set up the whole network. ( since stock markets only finance one company at once )
simultanious planning of complemnetary industries
Failed because of teh extensive corruption in crony capitalism ( so money to finanace all industries would not go to that )
What was the Heavy and chemicals industry drive ? ( HID) and What does that reveal ?
Subsidies were poored into chemical industries so they produce chemical weapons under the South Korea government
What are and how was the Pyramid groups created in Korea ? Give a an exemple of a company.
What do they say about the “Theory of Big Push” ?
They arose from LG group, wantes to open a cosmetic company but there was no plastic company, eneded up opening many vertically integrated companies ( plastic, fans, and then TV)
i.e. hunday have full set diversification, network of interactions
They comfirm the Big push theory that you need to have a network stablished for it, but bringg to attention that there is a way do do that without government intervention ( in a free market economy )
What is Worker-center Corporate Governance
work hard enough to keep the company stationary
slide 60.
ESOPS
slide 63
Why there are very low family firms in the UK
Did laws that if you wanted 30% of shares you would have to acquire all shares
What is the central idea of social democracy
Big Labor, Big Businesses, and Big Government
What are the problems within the Nordic Countries Social Democracy model
High unemployment for young people, not a
How did Germany do mass privatization after the soviet union fell
pay people to buy shares of companies
How did Russia and Check republic privatize
vouchers
How did Hungary privatize?
sold all firms to foreigns, everyone hates foreign
How did Poland mass privatized
distributed all the shares to investment funds
