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:

Identical Elements

A learning theory principle suggesting that transfer of learning occurs when the learning and application situations share the same elements.

Underlying Principles

Fundamental concepts or assumptions that form the basis for a system, theory, or policy.

External Locus

A belief that one's successes or failures result from external factors beyond their control.

Cognitive Ability

The capacity to perform higher mental processes of reasoning, remembering, understanding, and problem-solving.