Global and Comperative Governance

Question 1

What is a free-standing firm

Answer 1

A listed firm that does not control other listed firms

Question 2

What is a narrowly held firm

Answer 2

A firm that has a controlling shareholder

Question 3

How does the stock price of a family Firm react to the succession
( in high-income vs low-income countries )

Answer 3

If succession is a family member
low: P increase high: P decreases
If succession is not family member:
low: P decreases high: P increase

Question 4

What is the agency problem in Family firms

Answer 4

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

Question 5

What is a Block Trade Premium

Answer 5

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.

Question 6

What is a widely held firm?

Answer 6

No big shareholders just small ones

Question 7

Family firm

Answer 7

firm controlled by multiple family members

Question 8

Dual-class premium

Answer 8

worth more in corrupt countries because you are also buying control

Question 9

Why does the US does not have lots of family businesses?

Answer 9

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

Question 10

In the eyes of church, why was Coorporatism better than Capitalism ?

Answer 10

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

Question 11

First Corporation implemented: Italy

what is IRI ?

Answer 11

Each corporation is a vertically integrated industry = Association

• Each association would control prices and barries to entry
• goal: avoid competition

Question 12

Why would coorporatism have lots of youth unemployment when compared with Free market economy

Answer 12

Association:

Question 13

What is Import Subistition

Answer 13

find

Question 14

Why does Coorporatism countries do not need stock markets

Answer 14

fund

Question 15

What is the correlation between Coorporatism and Corruption

Answer 15

find

Question 16

Why does countries that are historically more catholic have lower quality of living ?

Answer 16

find

Question 17

What is it unique about France ? ( Free Market with lots of interventionism )

Answer 17

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

Question 18

How was the Soviet Union Finantial System ?

Answer 18

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 )

Question 19

High Income Eastern japan

Answer 19

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

Question 20

Keirestsu Hostile Take-over defense

Answer 20

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

Question 21

Adult Adoptions Japan

Answer 21

Reason why Q ratio’s

Question 22

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 )

Answer 22

huge pay to becoming the adped son of a japonese business.

Question 23

Power Distance

Answer 23

what

Question 24

individualism

Answer 24

Low Individualism: See more family firms

HIgh Individualism: Dont have family firms as much

Question 25

South Korea | - grown the fastest

Answer 25

?

Question 26

What is the “Big Push” Theory of Economic Develoment. Why did it failed ?

Answer 26

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 )

Question 27

What was the Heavy and chemicals industry drive ? ( HID) and What does that reveal ?

Answer 27

Subsidies were poored into chemical industries so they produce chemical weapons under the South Korea government

Question 28

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” ?

Answer 28

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 )

Question 29

What is Worker-center Corporate Governance

Answer 29

work hard enough to keep the company stationary | slide 60.

Question 30

ESOPS

Answer 30

slide 63

Question 31

Why there are very low family firms in the UK

Answer 31

Did laws that if you wanted 30% of shares you would have to acquire all shares

Question 32

What is the central idea of social democracy

Answer 32

Big Labor, Big Businesses, and Big Government

Question 33

What are the problems within the Nordic Countries Social Democracy model

Answer 33

High unemployment for young people, not a

Question 34

How did Germany do mass privatization after the soviet union fell

Answer 34

pay people to buy shares of companies

Question 35

How did Russia and Check republic privatize

Answer 35

vouchers

Question 36

How did Hungary privatize?

Answer 36

sold all firms to foreigns, everyone hates foreign

Question 37

How did Poland mass privatized

Answer 37

distributed all the shares to investment funds