Strategic Management
Chapter Exam Questions
Course Introduction
Strategic Management is a comprehensive course that explores the fundamental concepts, frameworks, and analytical tools used by organizations to gain and sustain a competitive advantage in dynamic environments. Students will learn how to conduct internal and external analyses, formulate strategic plans, and implement effective strategies across various business functions. The course also examines issues related to corporate governance, ethical decision-making, and global strategic challenges, preparing students to think critically and make informed decisions as future business leaders. Case studies and real-world applications are integrated to enhance practical understanding and strategic thinking skills.
Recommended Textbook Mergers Acquisitions and Corporate Restructurings 6th Edition by Patrick A. Gaughan
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Chapter 1: Introduction
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Q1) In a short-form merger:
A)Bidders only submit a two-page filing with the SEC
B)Deals usually close within two weeks
C)The standard stockholder approval process can be bypassed
D)A 51% approval by shareholders is required Answer: C
Q2) Private equity firms are frequent LBO dealmakers.
A)True
B)False
Answer: True
Q3) One of the advantages of an asset acquisition is that it may not be necessary to solicit approval from its own shareholders.
A)True
B)False Answer: True
Q4) Contingent value rights may provide some guarantee if the acquirer's shares fall below some level.
A)True
B)False Answer: True
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Chapter 2: History of Mergers
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Q1) Which of the following types of deals were common in the first merger wave?
A)Horizontal
B)Vertical
C)Oligopolistic
D)None of the above
E)a, b, and c
Answer: E
Q2) The first merger wave was significantly curtailed by the Sherman Antitrust Act.
A)True
B)False
Answer: False
Q3) Which of the following factors contributed to the end of the fifth merger wave?
A)Stock market downturn
B)Economic slowdown
C)Antitrust enforcement
D)None of the above
E)a, b, and c
F)Both a and b
Answer: F
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Chapter 3: Legal Framework
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Q1) The Celler Kefauver Act required bidders and targets to file with the Justice Department and Federal Trade Commission in advance of completing a merger or acquisition.
A)True
B)False
Answer: False
Q2) In the United States after shareholders tender their shares, they:
A)Cannot withdraw them
B)Can withdraw them at any time
C)Can withdraw them at the end of the year
D)Must sell them to a third party True or False
Answer: B
Q3) What transaction changed the way that Germany approached takeovers of German companies by non-German bidders:
A)Porsche v.Volkswagen
B)Vodafone v.Mannesmann
C)UBS v.Deutsche Bank
D)None of the above
Answer: B
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Chapter 4: Merger Strategy
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Q1) United Airlines was finally able to realize synergies when they acquired travel-related businesses such as hotels and car rental companies.
A)True
B)False
Q2) Schipper and Thompson found positive stock market announcement effects from diversification acquisition programs in the 1960s.
A)True
B)False
Q3) Revenue enhancing synergies are more difficult to achieve than cost economies
A)True
B)False
Q4) Wachovia's acquisition of Golden West Financial provided significant economies of scope which enabled the bank to show steady profits even during the subprime crisis.
A)True
B)False
Q5) The Merck-Medco deal is an example of related diversification.
A)True B)False
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Chapter 5: Antitakeover Measures
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Q1) The research of Bebchuk and Cohen found a negative relationship between firm value, as measured by Tobin's q, and the implementation of a staggered board.
A)True
B)False
Q2) Flip-in provisions allow holders of rights to acquire stock in the target, as opposed to flip-over rights, which allow holders to acquire stock in the acquirer.
A)True
B)False
Q3) Jarrell found that litigation can increase shareholder value through facilitating auctions.
A)True
B)False
Q4) This person invented the poison pill:
A)Sir James Goldsmith
B)Joe Flom
C)Martin Lipton
D)Carl Icahn
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Chapter 6: Takeover Tactics
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Q1) Borstadt and Swirlein shows the dissidents were successful in their proxy fights
A)Most of the time
B)No consistent pattern
C)42% of the time
D)Almost 80% of the time
Q2) Bris found that toe holds were used in what percent of the tender offers he examined?
A)30%
B)75%
C)15%
D)Nearly 100%
Q3) Bange and Mazzeo found that target companies whose CEO and chairman were the same person were more likely to be recipients of bypass offers.
A)True
B)False
Q4) Betton and Eckbo found out that toe holds are associated with higher tender offer premiums.
A)True
B)False
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Chapter 7: Hedge Funds As Activist Investors
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Q1) There is research which supports the view that Investments in activist funds tend to outperform nonactivist hedge fund investments.
A)True
B)False
Q2) Which of the following is not an example of an activist hedge funds?
A)Carl Icahn Enterprises
B)Relational Investors
C)Goldman Sachs
D)Jana
Q3) Which of the following may be a valid criticism of activist hedge funds?
A)May cause target firms to be too short-term oriented
B)Tend to reduce target financial performance
C)Often fail to yield positive returns for investors
D)All of the above
E)None of the above
Q4) Which of the following is true?
A)Hedge funds tend to facilitate more M&As
B)Hedge funds tend to have a dampening effect on M&As
C)Hedge funds are neutral as it relates to M&A activity
D)None of the above
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Chapter 8: Going-Private Transactions and Leveraged Buyouts
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Q1) In the United States two-tiered tender offers are not that common any more.
A)True
B)False
Q2) Which of the following firms were or are considered "LBO firms"?
A)KKR
B)Forstmann Little
C)Blackstone Group
D)All of the above
E)None of the above
Q3) Kaplan found that the tax benefits in LBOs were:
A)Predictable
B)Built into the takeover premium
C)Did not affect the premium
D)Both a and c
E)Both a and b
Q4) Lehan and Poulson showed that buyout premiums were unrelated to the target's free cash flows.
A)True
B)False
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Chapter 9: The Private Equity Market
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Q1) Phalippou and Gottschalg analyzed the same return data as Kaplan and Schoar but found that private equity returns trailed the S&P 500 when unexited deals were taken into account.
A)True
B)False
Q2) Officer et al.found that target companies received higher takeover premiums in club deals.
A)True
B)False
Q3) Kaplan and Schoar found which of the following with respect to private equity firms?
A)Growth in the industry
B)Decline in the industry
C)Persistence in returns
D)All of the above
E)None of the above
Q4) Drexel Burnham and Lambert and Michael Milken were pioneers in the development of the hedge fund industry.
A)True
B)False
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Chapter 10: The Junk Bond and the Leveraged Loan Market and
Stapled Financing
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Q1) The collapse of the junk bond market mainly ended the use of original issue high-yield bonds in the decades that followed.
A)True
B)False
Q2) Which of the following factors contributed to the growth of the junk bond market?
A)Development of market makers
B)Standardized contracts
C)Changing risk perceptions
D)All of the above
E)None of the above
Q3) Ma, Rao, and Peterson showed that the junk bond market was so resilient in the mid-1980s that the bankruptcy of LTV had little impact of bond default probabilities.
A)True
B)False
Q4) The original issue high-yield bond market got its start in the late 1970s.
A)True
B)False
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Chapter 11: Corporate Restructuring
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Q1) Many studies covering a quarter of a century document the positive shareholder wealth effects of sell-offs.
A)True B)False
Q2) Sell-offs of their parts supplier units enabled GM and Ford to successfully use sell-offs to avoid union compensated-related liabilities of those units.
A)True B)False
Q3) The trend in European sell-offs is opposite that of the United States.
A)True B)False
Q4) Asian spin-off volume:
A)Historically follows the same pattern as the U.S.spin-off volume
B)Followed the same pattern as European spin-off volume
C)Has declined in the past when spin-offs rose in European and the United States
D)None of the above
Q5) Cash flow needs motivated the sell-off of Hertz by GM.
A)True B)False
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Chapter 12: Restructuring in Bankruptcy
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Q1) A reorganization plan in Chapter 11 is part of a larger document called a disclosure statement.
A)True
B)False
Q2) Laws regulating corporate reorganization in bankruptcy are more liberal from the corporate debtor's perspective in the United States than in Europe and Canada.
A)True
B)False
Q3) Dun & Bradstreet showed that which of the following are causes of business failure?
A)Economic factors e.g., industry weakness, insufficient profits)
B)Financial factors e.g., heavy operating expenses, insufficient capital)
C)Neglect e.g., poor work habits, business conflicts)
D)Fraud
E)All of the above
Q4) In the United States, a company may only file for Chapter 11 bankruptcy protection one time.
A)True
B)False
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Chapter 13: Corporate Governance
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Q1) Research, such as the study by Fich and Shivdasani, has shown that companies that have over half of the outside directors sitting on three or more boards have which of the following?
A)Better financial performance but not better governance
B)Better governance but not better financial performance
C)Better governance and better financial performance
D)Neither better governance nor better financial performance
Q2) Research shows that companies tend to have positive shareholder wealth effects when outside directors are added to a company's board.
A)True
B)False
Q3) Core, Holthausen, and Larker's research found that CEO compensation was greater for the directors who were gray, over age 69, or who served on three or more boards.
A)True
B)False
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Chapter 14: Joint Ventures and Strategic Alliances
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Q1) McConnell and Nantell study showed that shareholders in companies entering into joint ventures enjoyed announcement period returns of -4%.
A)True
B)False
Q2) Chan, Kensinger, Keown, and Martin found significant transfers of wealth from alliance partners.
A)True
B)False
Q3) Research by Marciukaityte, Roskelley, and Wang found:
A)Positive announcement effects to the formation of alliances in the financial services industry
B)Alliances in the financial services industry showed improvements in operating performance relative to the industry
C)Alliance partners were more likely to enter into joint ventures or M&A with each other than randomly selected firms
D)All of the above
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Chapter 15: Valuation
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Q1) Which of the following factors will influence the initial potential dilution of earnings per share?
A)Differential in P/E ratios
B)Relative size of the two firms as measured by earnings
C)Taxability of target earnings
D)All of the above
E)Both a and b
Q2) For a company with positive debt:
A)Enterprise value is less then equity value
B)Enterprise value equals equity value
C)Enterprise value is more than equity value
D)None of these
Q3) Acquiring firm shareholders tend to earn zero or negative returns from mergers.
A)True
B)False
Q4) The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.
A)True
B)False
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Chapter 16: Tax Issues in Mergers & Acquisitions
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Q1) In the United States, amortization of goodwill is deductible for tax purposes over a period of:
A)5 years
B)10 years
C)15 years
D)20 years
Q2) In a Type B reorganization in the United States, at least what percent of the payment to the target must be stock in the acquiring company:
A)20%
B)50%
C)80%
D)100%
E)No specific percentage
Q3) In a Type C reorganization, cash may be used only if 50% of the target shares were purchased with stock.
A)True
B)False
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