For today’s exam please answer the following questions:
- During our Corporate Governance class, we have discussed a large variety of different corporate governance mechanisms. Please identify what broad classes of such mechanisms exist and give at least one example for each class that illustrates how these mechanisms help counter the basic problems of governing a firm. In describing the classes and specific examples please make sure that you base your analysis in the appropriate literature. (50 points)
- For the second question (and the remaining 50 points) please think of firms that engage in unrelated diversification (conglomerates, business groups, etc.) and discuss the effect that ‘good’ governance might have on these firms’ decisions to further pursue or reduce unrelated diversification (you can include a discussion of contingencies). Please derive one testable hypothesis from your arguments.