CFA Level I · CFA Level I Exam · Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits
Compared with a company with weak governance, a company with strong governance and transparent disclosure is most likely to experience:
A company with strong governance and transparency most likely faces a lower likelihood of fraud and regulatory penalties. Effective controls, independent oversight and disclosure reduce misreporting and misconduct. Higher information asymmetry and heavy related-party dealings are typical symptoms of weak governance, not strong governance.
- Aa lower likelihood of fraud and regulatory penaltiesCorrect
- Bhigher information asymmetry with shareholders
- Cgreater reliance on related-party transactions
Explanation
Strong governance with disclosure and internal controls reduces fraud, misreporting and legal or regulatory risk. The other options describe weaknesses associated with poor governance.
Did you get it right without looking?
One question tells you little. A timed set on Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits shows your real accuracy, how long you take and where you lose marks.
More Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits questions
- An investor integrates ESG considerations into the analysis of a manufacturing company. The factor that is best described as a governance co…
- A company combines the roles of chair and chief executive officer in one person. Which of the following is the most likely governance risk o…
- A company's board is dominated by long-serving directors who are close friends of the CEO, and the CEO also serves as board chair. Which gov…
- A firm pays its executives almost entirely through annual bonuses tied to current-year reported net income. This compensation structure most…
- Which feature of a board is most likely to strengthen its ability to act in shareholders' interests?
- Which of the following groups is most likely to be classified as an internal stakeholder of a corporation?