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SGMA 591 Exam Questions With Accurate Answers
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SGMA 591 Exam Questions With Accurate Answers 2024-2025Which three groups of stakeholders - Answer ( Capital Market ) stakeholders
Shareholders and the major suppliers of a firm's capital including debt holders
( Product Market ) stakeholders
A firm's primary customers, suppliers, host communities, and unions representing the
workforce
( Organizational ) stakeholders
Firm's employees, including both non-managerial and managerial personnel
What two different views are there of the firm - Answer Firm as Property
-Profitability over Responsibility
-Zero Sum
-US
Social Entity Firm
-Responsibility over prof
-Stakeholder symbiosis
-Europe, Japan
What is most critical criterion in prioritizing stakeholders. - Answer Power
Firm as _____ of contracts - Answer Nexus of contracts, including:
Ownership contract: shareholder
Lending contract: debt-holder
Employee contract: manager & employees
, Corporate Governance: -marks a set of mechanisms used to manage the relationships (&
conflicting interests) among stakeholders, and to determine and control the strategic
direction and performance of organizations (aligning strategic decisions with company
values)
Agency Theory deals with the relationship between - Answer Principals-Owners and of
the firm (shareholders)
Agents-who are the paid by principals to perform a job on their behalf (executives)
Information Asymmetry - One party to a transaction has more or better information than
the other source of 'agency costs'
How do agency problems occur? - Adverse Selection(ex ante)-Limited ability of
shareholders to determine competencies of execs
Moral Hazard (ex post)-Since owners have limited access to company information, thus
making executives free to pursue their own interests.
Managerial Opportunism - Seeking self interest with guile (cunning and deceit)
How does diversification pay off for execs? - Ans Larger firms=Larger compensations
Larger portfolio-Lower risk of unemployment
What are agency costs -Ans A sum of the incentive costs, monitoring costs, enforcement
costs, and individual financial losses principals incur, because governance mechanisms
cannot ensure total compliance by the agent
What are internal governance measures -Ans Ownership concentation
institutional shareholders, blockholders, shareholders
Board of Directors
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