SELF CHECK 1.3 _TUTORIAL (1)

Opened: Sunday, 30 October 2022, 12:00 AM
Due: Sunday, 6 November 2022, 12:00 AM
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TUTORIAL_1

  1. Goal of Financial Management. What goal should always motivate the actions of the firm's financial manager?
  2. Agency Problems. Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?
  3. Primary versus Secondary Markets. You have probably noticed coverage in the financial press of an initial public offering (IPO) of a company's securities. Web search company Google is a relatively recent example. Is an IPO a primary-market transaction or a secondary-market transaction?
  4. Ethics and Firm Goals. Can our goal of maximizing the value of the stock conflict with other goals, such as avoiding unethical or illegal behavior? Do you think subjects such as customer and employee safety, the environment, and the general good of society fit in this framework, or are they essentially ignored? Try to think of some specific scenarios to illustrate your answer.
  5. International Firm Goal. Would our goal of maximizing the value of the stock be different if we were thinking about financial management in a foreign country? Why or why not?
  6. Agency Problems and Corporate Ownership. Corporate ownership varies around the world. Historically, individuals have owned most shares in public corporations in the United States. In Germany and Japan, however, banks, other large financial institutions, and other companies own most of the stock in public corporations. Do you think agency problems are likely to be severe in Germany and Japan than in the United States? Why? In recent years, large financial institutions such as mutual funds and pension funds have been becoming the dominant owners of stock in the United States, and these institutions are becoming more active in corporate affairs. What are the implications of this trend for agency problems and corporate control?