Which of the Following Statements Is False

question 10

Multiple Choice

Which of the following statements is false?

• A) Recently, shareholders have started organizing "no" votes. That is, when they are dissatisfied with a board, they simply refuse to vote to approve the slate of nominees for the board.
• B) One early study of proxy contests found that the announcement of a contest increased firm stock price by 8% on average, even if the challenge was eventually unsuccessful and the incumbents won reelection.
• C) Shareholders' only real role in governance is in electing the directors of the company.
• D) Perhaps the most extreme form of direct action that disgruntled shareholders can take is to hold a proxy contest and introduce a rival slate of directors for election to the board.

Comprehend M&M propositions and their implications on corporate finance, including the effects of capital structure on firm value.

Understand the concept of capital structure and the relevance of debt-equity ratios.

Recognize the impact of financial leverage on firm value and bankruptcy risk.

Identify the costs associated with bankruptcy and financial distress.

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Definitions:

Ringelmann Effect

The phenomenon where individual productivity decreases as the size of a group increases, due to factors like reduced coordination or motivation.

Dominant vs. Nondominant

A comparison between the more powerful, prevailing, or influential (dominant) side or aspect and the less powerful, subordinate, or less influential (nondominant) side or aspect.

Social Facilitation

The improvement in performance observed when individuals perform tasks in the presence of others, as compared to when they perform the same tasks alone.

Meta-Analysis

A statistical technique that combines the results of multiple studies to determine the overall effect size or consensus findings across various research studies.