Question

Which two of the following five statements are correct?

Select two alternatives:

1. While the protection of shareholder rights is a very important principle in Europe, in the US the stakeholder view of the corporation is most common.

2. The separation of ownership and control is perhaps the most important reason for the success of the corporate organizational form. Because any investor can hold an ownership stake in a corporation, investors are able to diversify and thus, with no costs, reduce their risk exposures.

3. The Swedish code for good corporate governance is legally binding for all listed Swedish companies.

4. Corporate governance is the system of controls, regulations, and incentives designed to prevent fraud and to minimize the conflicts of interests between managers and investors.

5. A pyramid structure implies that despite holding a large capital fraction in companies, the controlling owners have only limited voting power.

Answer 1

Following options are true

2. The separation of ownership and control is perhaps the most important reason for the success of Corporate organisational forms. because any investor can hold ownership stock in a corporation, investors are able to diversify and with no cost able to reduce their risk exposure.

4. Corporate governance is the system of controls regulations and incentives designed to prevent fraud and remove the conflict of interest between managers and investors.