able to stockholders in the market will be badly managed True False We choose firm valu sume that makes are eficient hinctive in decision make making we do not need to True False with fewer directors re a lly effective corporate governance than boards True False 4. Rounds with me hands with move insiders are few insider ally more effective at corporate overnance than boards with True False 3. Pinancial markets tend to reach negatively investment announcements (R&D, new project) made by firms True False 6. The marginal investor in a stack is the investor who holds the most stock in the company True False Question 3 (3 marks) In any firm, the balance of power between stockholders and managers is a function of internal as well as external factors. Events can cause the power to shift towards managers or towards stockholders or leave the balance unchanged. Evaluate how each of the following events would alter the balance of power. Event Management Power increases (1) Stockholder Power increases No Effect The firm decides to expand its board of directors from 11 members to 22 members and allows the CEO to pick the additional directors. An activist investor manages to get three of his nominees elected to the board of directors at the expense of management nominees. The state passes a law restricting hostile takeovers. The CEO of another firm in the same industry is replaced because of poor stock price and earnings performance. CalPers, the California Employees Pension fund with a history of activism, buys 5% of the outstanding stock in the fim. The firm's stock, which is currently followed by no analysts, is added to the list of followed companies at four investment banks