1. All of the following statements are true about outside directors EXCEPT? ________.
A. There is a trend in the United States to increase the number of outsiders on boards and to reduce the total size of the board
B. Outsiders account for? 80% of board members in large U.S. corporations
C. Outside directors might be executives of other firms but are not employees of the? board's corporation
D. The board of directors of a typical large U.S. corporation has an average of 10 directors? (2 are inside directors and 8 are outside? directors)
E. There is clear evidence indicating that a high proportion of outsiders on a board results in improved financial performance
2. All of the following statements are true about agency theory EXCEPT? ________.
A. according to the agency? theory, the likelihood that problems will occur increases when stock is widely? held, when the board of directors is composed of people who know little of the company or who are personal friends with top management
B. the agency theory proposes that? management-controlled firms with weak boards are more likely to go into debt to diversify into unrelated markets
C. proponents of the agency theory argue that managers in? management-controlled firms select less risky strategies with quick payoffs to keep their jobs
D. the agency theory states that a majority of a board needs to be from outside the firm so that top management is prevented from acting selfishly to the detriment of the shareholders
E. the agency theory proposes? that, because of their long tenure with the? corporation, insiders tend to identify with the corporation and its success