2022年2022年金融市场与机构 3.pdf

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1、Chapter 16What Should We Do About Conflicts of Interest in the Financial Industry? Multiple Choice Questions 1. Economies of scope refer to cost savings that arise when the (a) size of financial transactions increase. (b) size of financial transactions decrease. (c) number of different activities un

2、dertaken increases. (d) number of different activities undertaken decreases. Answer: C 2. A financial institution can achieve cost savings by engaging in multiple activities. These are called economies of (a) scope. (b) scale. (c) complexity. (d) information. Answer: A 3. A financial institution can

3、 achieve cost savings in its credit card operations if it increases the number of cardholders. This is an example of economies of (a) scope. (b) scale. (c) complexity. (d) information. Answer: B 4. Which combination of activities within a single financial institution is least likely to lead to confl

4、icts of interest? (a) auditing and management advisory services (b) commercial banking and investment banking (c) assessment of credit quality and consulting (d) consumer lending and business lending Answer: D 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 1 页，共 11 页

5、 - - - - - - - - - 202 Mishkin/Eakins ? Financial Markets and Institutions, Fifth Edition 5. Conflicts of interest pose a problem because they (a) lower the quality of information. (b) increase problems of asymmetric information. (c) make the financial system less efficient. (d) do all of the above.

6、 Answer: D 6. An advantage of providing multiple financial services within one financial institution is that it (a) lowers information costs. (b) develops broader long-term relationships with customers. (c) both (a) and (b). (d) none of the above. Answer: C 7. A conflict of interest occurs when (a)

7、a financial firm sells a service to its customers for a price that exceeds the cost of producing the service. (b) lenders prefer higher interest rates and borrowers prefer lower interest rates. (c) riskier borrowers are the ones who are more likely to apply for loans. (d) people expected to provide

8、reliable information to the public have incentives not to do so. Answer: D 8. A conflict of interest between providing impartial research about companies issuing securities and selling those same securities arises in (a) investment banking. (b) commercial banking. (c) accounting firms. (d) mutual fu

9、nds. Answer: A 9. If potential revenues from underwriting greatly exceed brokerage commissions, there is _ incentive for investment bank analysts to report _ information about firms issuing securities. (a) stronger; unbiased (b) stronger; favorable (c) weaker; unbiased (d) weaker; favorable Answer:

10、B 10. Spinning is the practice of (a) investment banks allowing executives of potential client companies to buy underpriced initial public offerings of other companies securities.(b) investment bank analysts providing misleading information about a company to encourage more investors to purchase the

11、 companys securities.(c) accounting firms encouraging its audit clients to also purchase its manage advisory services. (d) credit rating agencies providing higher ratings on a companys securities in order to develop a long-term relationship with the company. 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - -

12、- - - - - - - - 名师精心整理 - - - - - - - 第 2 页，共 11 页 - - - - - - - - - Chapter 16 What Should We Do About Conflicts of Interest in the Financial Industry? 203 Answer: A 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 3 页，共 11 页 - - - - - - - - - 204 Mishkin/Eakins ? Fina

13、ncial Markets and Institutions, Fifth Edition 11. Investment banks are guilty of conflict of interest when they (a) pressure their analysts to produce research favorable to their client firms. (b) permit executives of client firms to alter analysts research on their firms. (c) prohibit analysts from

14、 making negative or controversial comments about client firms. (d) all of the above. Answer: D 12. Investment banks serve two client groups, (a) home buyers and mortgage lenders. (b) people saving for retirement and pension funds. (c) issuers of securities and investors in those securities. (d) mutu

15、al funds and investors with relatively small amounts to invest. Answer: C 13. Auditors attempt to reduce information asymmetry between a firms managers and its(a) customers. (b) owners. (c) employees. (d) competitors. Answer: B 14. Conflicts of interest in the Arthur Andersen accounting firm intensi

16、fied when _ became the firms largest source of profits and large clients pressured _ office managers to give favorable audits. (a) consulting; regional (b) consulting; national (c) auditing; regional (d) auditing; national Answer: A 15. The potential conflict of interest when a single accounting fir

17、m provides both auditing and consulting services is that the firm can (a) charge higher fees to its audit clients and lower fees for its consulting services so it can expand its consulting business. (b) charge higher fees to its consulting clients and lower fees for its audit services so it can expa

18、nd its auditing business. (c) provide unjustifiably favorable audit reviews for firms that are large clients for its consulting services. (d) pressure its clients into paying high fees for both auditing and consulting services. Answer: C 16. The conflict of interest in credit-rating agencies arises

19、because _ pay to have securities rated and, as a result, the agencies ratings may be biased _.(a) security issuers; downward (b) security issuers; upward (c) investors; downward (d) regulators; upward 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 4 页，共 11 页 - - - -

20、- - - - - Chapter 16 What Should We Do About Conflicts of Interest in the Financial Industry? 205 Answer: B 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 5 页，共 11 页 - - - - - - - - - 206 Mishkin/Eakins ? Financial Markets and Institutions, Fifth Edition 17. Why did

21、credit-rating agencies switch from charging subscribers for security ratings information to having the security issuers pay for having their securities rated? (a) They discovered security issuers would pay enormous sums to insure that their securities received favorable ratings. (b) Subscribers were

22、 concerned that the information they received from the agencies was not reliable. (c) Investors could free ride on the information the agencies provided, which cut into the agencies earnings. (d) The big three rating agencies controlled nearly the entire market for security ratings. Answer: C 18. Si

23、nce firms issuing new securities pay to have these securities rated, the credit-rating agencies have incentive to _ to attract more business. (a) give favorable ratings (b) give impartial ratings (c) lower the fees they charge (d) practice spinning Answer: A 19. Universal banking refers to combinati

24、ons of the activities of commercial banking, investment banking, and (a) auditing. (b) insurance. (c) credit assessment. (d) consulting. Answer: B 20. Universal banking was prohibited for a period of time by the (a) Federal Reserve Act. (b) Bank Holding Company Act. (c) Gramm-Leach-Bliley Financial

25、Services Modernization Act. (d) Glass-Steagall Act. Answer: D 21. A review of the different sources of conflicts of interest suggests that the _ the number of financial activities within an institution and the _ the number of clients, the _ is the potential for conflict of interest. (a) greater; gre

26、ater; greater (b) smaller; smaller; smaller (c) greater; greater; smaller (d) smaller; smaller; greater Answer: A 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 6 页，共 11 页 - - - - - - - - - Chapter 16 What Should We Do About Conflicts of Interest in the Financial Ind

27、ustry? 207 22. Research shows there is a _ correlation between credit ratings and default probabilities, which suggests that credit rating agencies _ the potential conflict of interest. (a) low; exploit (b) low; do not exploit (c) high; exploit (d) high; do not exploit Answer: D 23. The market value

28、 of credit assessments is highest when the rating agencies give _ ratings, which _ their incentives to exploit potential conflicts of interest. (a) favorable; decreases (b) favorable; increases (c) impartial; decreases (d) impartial; increases Answer: C 24. To maintain their reputations, during the

29、1920s universal banks (a) shifted their underwriting activities from departments within the bank to separate affiliates. (b) focused more on securities of well-known issuers. (c) both (a) and (b). (d) none of the above. Answer: C 25. Which of the following has not been a major factor contributing to

30、 financial conflict of interest scandals in recent years? (a) inappropriately designed compensation mechanisms (b) poor economic conditions (c) employees of a financial firm profiting from activities that diminish a firms reputational rents (d) poor management Answer: B 26. The Sarbanes-Oxley Act of

31、 2002 included all the following provisions except (a) establishment of the Public Company Accounting Oversight Board. (b) a ban on accounting firms providing non-audit services to an audit client. (c) a requirement that a firms chief executive officer and chief financial officer certify that the fi

32、rm s accounting statements fairly represent its operations and financial conditions.(d) a requirement that members of a firms audit committee be managers in the firm. Answer: D 27. (I) The marketplace may be able to control conflicts of interest in some instances because there is a high value to a f

33、irms reputational capital. (II) Eliminating multiple activities within financial firms may lower the cost of reliable information. (a) (I) is true; (II) is false. (b) (I) is false; (II) is true. (c) (I) and (II) both are true. (d) (I) and (II) both are false. Answer: A 名师资料总结 - - -精品资料欢迎下载 - - - - -

34、 - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 7 页，共 11 页 - - - - - - - - - 208 Mishkin/Eakins ? Financial Markets and Institutions, Fifth Edition 28. The most intrusive remedy for conflicts of interest is (a) regulatory oversight. (b) mandatory disclosure of information. (c) socialization of inf

35、ormation production. (d) enforcing separation of functions within financial firms. Answer: C 29. The Global Legal Settlement of 2002 dealt with conflicts of interest in (a) accounting firms. (b) investment banks. (c) credit rating agencies. (d) all of the above. Answer: B 30. Which of the following

36、provisions of legislation to deal with conflicts of interest does not increase the flow of information in financial markets? (a) requiring a firms chief officers to certify its financial statements and other disclosures (b) requiring investment banks to make their analysts recommendations public(c)

37、requiring disclosure of off-balance sheet transactions (d) increasing resources available to the Securities and Exchange Commission to supervise financial markets Answer: D 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 8 页，共 11 页 - - - - - - - - - Chapter 16 What Sh

38、ould We Do About Conflicts of Interest in the Financial Industry? 209 True/False 1. Conflicts of interest are examples of the broader problem of moral hazard. Answer: TRUE 2. Conflicts of interest are unethical, but they do not affect the ability of financial markets to allocate funds to their most

39、productive uses. Answer: FALSE 3. For failing to provide an honest audit of Enron, the accounting firm Arthur Andersen was prohibited from conducting audits of publicly traded corporations. Answer: TRUE 4. Regulations that enforce separation of financial functions into separate affiliates or firms w

40、ill reduce conflicts of interest. Answer: TRUE 5. Regulations that enforce separation of financial functions into separate affiliates or firms will reduce the costs of producing information. Answer: FALSE 6. The conflict of interest that arose in investment banking was that analysts reported favorab

41、le research results to firms issuing securities and unfavorable results to investors who were potential purchasers of those securities. Answer: FALSE 7. The conflict of interest that arose in the accounting industry was that accounting firms who earned consulting revenues from their audit clients ha

42、d incentives to provide favoarable audits of those clients. Answer: TRUE 8. The conflict of interest that may arise in credit rating is that the rating agencies are paid by investors and have incentives to rate firms unfavorably so that investors can buy the firms securities at lower prices. Answer:

43、 FALSE 9. Conflicts of interest are a serious problem when they are visible to the market. Answer: FALSE 10. Reputational rents are profits firms earn because they are trusted by the marketplace. Answer: TRUE 11. The Sarbanes-Oxley Act of 2002 was passed in response to scandals in the investment ban

44、king industry. Answer: FALSE 12. The Sarbanes-Oxley Act of 2002 provides for oversight of accounting firms but makes no provisions for increasing the flow of information to financial markets. Answer: FALSE 13. The Sarbanes-Oxley Act of 2002 and the Global Settlement of 2002 both have the potential t

45、o reduce economies of scope. 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 9 页，共 11 页 - - - - - - - - - 210 Mishkin/Eakins ? Financial Markets and Institutions, Fifth Edition Answer: TRUE 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - -

46、第 10 页，共 11 页 - - - - - - - - - Chapter 16 What Should We Do About Conflicts of Interest in the Financial Industry? 211 Essay 1. Why should we be concerned abut conflicts of interest in the financial services industry? 2. What conflicts of interest can arise in investment banking? 3. What conflicts

47、of interest can arise in accounting firms? 4. What conflicts of interest can arise in credit rating agencies? 5. What conflicts of interest can arise in universal banking? 6. How are conflicts of interest related to the concepts of moral hazard and principal-agent problems? 7. Evaluate the major provisions of Sarbanes-Oxley and the Global Settlement as remedies for conflict of interest problems. 名师资料总结 - - -精品资料欢迎下载 - - - - - - - - - - - - - - - - - - 名师精心整理 - - - - - - - 第 11 页，共 11 页 - - - - - - - - -