Principles of Corporate Finance_ 12th Edition

Chapter 33 Governance and Corporate Control Around the World 885

bre44380_ch33_867-886.indd 885 09/30/15 12:12 PM

Select problems are available in McGraw-Hill’s Connect.

Please see the preface for more information.

BASIC

1. Financial system structure Which countries have

a. The largest stock markets?

b. The largest bond markets?

c. The smallest direct holdings of shares by individual investors?

d. The largest holdings of bank deposits by individual investors?

e. The largest holdings of shares by other corporations?

f. The largest use of trade credit for financing?

In each case, define “largest” or “smallest” as total value relative to GDP.

2. Financial system structure What is a keiretsu? Give a brief description.


3. Corporate governance Do Japanese investors play an important role in corporate financial
   policy and governance? If not, could they?


4. Corporate governance German banks often control a large fraction of the shareholder
   votes for German businesses. How do they get that voting power?


5. Corporate governance What is meant by the German system of codetermination?


6. Ownership form What is the most common form of ownership of corporations worldwide?


7. Pyramids Suppose that a shareholder can gain effective control of a company with 30% of
   the shares. Explain how a shareholder might gain control of company Z by setting up a holding
   company X^2 that holds shares in a second holding company X, which in turn holds shares in Z.


8. Real effects of financial systems Why may market-based financial systems be better in
   supporting innovation and in releasing capital from declining industries?


9. Corporate governance What is tunneling? Why does the threat of tunneling impede the
   development of financial markets?

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PROBLEM

SETS

R. Morck and B. Yeung, “Never Waste a Good Crisis: An Historical Perspective on Comparative
Corporate Governance,” Annual Review of Financial Economics 1 (2009), pp. 145–179.

A. Shleifer and R. W. Vishny, “A Survey of Corporate Governance,” Journal of Finance 52 (June
1997), pp. 737–783.

For discussions of the role of law, politics, and finance see:

R. LaPorta, F. Lopez-de-Silanes, and A. Shleifer, “The Economic Consequences of Legal Origins,”
Journal of Economic Literature 46 (2008), pp. 285–332.

R. Rajan and L. Zingales, Saving Capitalism from the Capitalists (New York: Crown Business, 2003).

For the evidence on why finance matters for growth, see:

R. Levine, “Financial Development and Economic Growth: Views and Agenda,” Journal of Economic
Literature 35 (1997), pp. 688–726.

R. Rajan and L. Zingales, “Financial Dependence and Growth,” American Economic Review 88 (June
1998), pp. 559–586.

Finally, if you’d like to read about corporate governance gone wrong . . .

P. Healy and K. Palepu, “The Fall of Enron,” Journal of Economic Perspectives 17 (Spring 2003), pp. 3–26.

S. Johnson, R. La Porta, F. Lopez-de-Silanes, and A. Shleifer, “Tunneling,” American Economic
Review 90 (May 2000), pp. 22–27.