Questions on Coles, Naveen and Naveen (2008)
What relationship do the authors find between board size and firm performance?
A) Larger boards always reduce firm value
B) Smaller, more independent boards always perform better
C) Board structure should match the firm’s needs—larger boards help advising-heavy firms
D) There is no relationship between board size and firm performance
C) Board structure should match the firm’s needs—larger boards help advising-heavy firms
What type of social ties between CEOs and audit committee members do the authors observe?
A) Only professional ties through employment
B) Educational ties and professional ties
C) Employment, educational, and friendship ties
D)Professional and personal ties
D)Professional and personal ties
According to Coles, Naveen, and Naveen (2008), firms with high R&D intensity are likely to benefit from:
A) More independent directors
B) A smaller, leaner board
C) Greater insider representation on the board
D) A board with more than 15 members
C) Greater insider representation on the board
According to the study, what is one effect of CEO-audit committee friendship ties?
A) Higher audit fees
B) Lower financial performance
C) Less likelihood of auditors issuing going-concern opinions
D) Stricter oversight of financial statements
C) Less likelihood of auditors issuing going-concern opinions
Which different roles of the board does the article distinguish?
A) Advisory Role & Monitoring Role
B) Monitoring Role & Supervisory Role
C) Advisory Role & Communicating Role
D) Supervisory Role & Communicating Role
A) Advisory Role & Monitoring Role
What recommendation could policymakers consider based on the study’s findings?
A) Outright banning all social ties between CEOs and audit committees
B) Requiring public disclosure of social ties between CEOs and audit committee members
C) Removing audit committees from corporate governance
D) Allowing only CEOs to choose audit committee members
B) Requiring public disclosure of social ties between CEOs and audit committee members
Why are the findings of this study particularly significant in the context of corporate scandals (e.g., Enron, WorldCom)?
A) They suggest that stricter regulations on corporate governance are unnecessary
B) They question the idea that smaller, independent boards are always better for firm value
C) They confirm that insider-dominated boards are always more effective
D) They prove that firms should eliminate their boards entirely
B) They question the idea that smaller, independent boards are always better for firm value
Are all social ties between CEOs and audit committee members detrimental?
A) Yes, all social ties weaken audit committee oversight
B) No, only friendship ties have a negative impact on oversight quality
C) No, employment and educational ties actually improve audit quality
D) Yes, but only in companies with weak financial controls
B) No, only friendship ties have a negative impact on oversight quality
Which factor is associated with a firm having more insiders on its board?
A) High levels of debt financing
B) Strong union presence
C) A history of financial fraud
D) High R&D intensity requiring firm-specific knowledge
D) High R&D intensity requiring firm-specific knowledge
What is a key implication of the study for policymakers regarding audit committee independence?
A) Regulators should ban all CEO social interactions with audit committee members
B) Audit committees should be replaced with external financial regulators
C) CEOs should not be allowed to appoint audit committee members
D) Independence requirements should be expanded to consider social ties, not just financial or family ties
D) Independence requirements should be expanded to consider social ties, not just financial or family ties