Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
12 Cards in this Set
- Front
- Back
|
Corporate Governance
|
The economic, legal, and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers, and other stakeholders of the company
|
|
|
Public corporation
|
jointly owned by a multitude of shareholders protected by limited liability; is a major organizational innovation with powerful economic consequences
|
|
|
Complete contract
|
contract which specifies exactly what the manager will do under each of all possible future contingencies, there will be no room for any conflicts of interest or managerial discretion
|
|
|
Residual control rights
|
refers to the right to make discretionary decisions under those contingencies that are not specifically covered by the contract
|
|
|
Free cash flow
|
represents a firm's internally generated fund in excess of the amount needed to finance all investment projects with positive net present values
|
|
|
Incentive contracts
|
stocks and bonds offered to managers; used to reduce the "wedge" (between managerial control rights and cash flow rights; resulting in managers not being interested in the maximization of shareholder wealth) and better align the interests of managers with those of investors
|
|
|
Legal origins
|
English common law
French civil law German civil law Scandinavian civil law |
|
|
Pyramidal ownership
|
When large shareholders, often founders and their families, use this structure in which they control a holding company that owns a controlling block of another company, which in turn owns controlling interests in yet another company, and so on.
|
|
|
Equity cross-holdings
|
used to concentrate and leverage voting rights to acquire control
|
|
|
Sarbanes-Oxley Act
|
The U.S. Congress passed this law in 2002 to strengthen corporate governance. The act requires the creation of a public accounting oversight board. It also requires that the CEO and CFO sign off on the company's financial statements
|
|
|
Dodd-Frank Act
|
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 aims to identify and reduce the systematic risk of the entire financial system by regulating Wall Street and big banks
|
|
|
Key features to the Dodd-Frank Act...
|
Volker rule
Resolution authority Derivative securities Systematic risk regulation Consumer protection |
