Which of the Following Statements Is FALSE

question 38

Multiple Choice

Which of the following statements is FALSE?

• A) Controlling shareholders pay for their control rights because the firm effectively faces a higher cost of equity for outside capital.
• B) Most countries follow what is called the stakeholder model, giving explicit consideration to other stakeholders-in particular, rank-and-file employees.
• C) In a pyramid structure, a family first creates a company in which it owns more than 50% of the shares and therefore has a controlling interest.
• D) A conflict of interest arises because the family has an incentive to try to move profits (and hence dividends) down the pyramid-that is, toward companies in which it has few cash flow rights and away firms in which it has more cash flow rights.

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Definitions:

Net Exports

The disparity between the total amount a country exports and the total amount it imports.

Interest Rate

The percentage charged on borrowed money, or paid to investors, indicating the cost or profit of borrowing or lending.

Net Capital Outflow

The difference between a nation's total investment in foreign assets and the total foreign investment in its domestic assets over a certain period.

Exchange Rate

The worth of one currency when converted into another, indicating the amount of one currency that can be swapped for another.