PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Question
Chapter 32, Problem 17PS
Summary Introduction
To discuss: The given statement.
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Students have asked these similar questions
Which of the followings is NOT an advantage of financial institutions in consumption
smoothing?
A. They help to solve moral hazard and adverse selection issues.
B. They help to share risks.
C. They help to reduce transaction costs.
D. They help to create more jobs.
how do compensation plans, including bonus structures, drive behavior?
How can transfer pricing, for example, lead to outcomes that are not in the best interests of the organization?
What do you think about executive bonuses tied to stock prices in a public company?
What other issues can you see with compensation plans?
Which of the following is an example of the agency problem?
a.
Managers always invest in projects that have appropriate returns and that will increase shareholder wealth.
b.
Managers resign when they believe they have not always acted in the best interests of shareholders.
c.
Managers conduct an acquisition program purely to increase the size of an organisation.
d.
Managers look for new projects as they want to avoid business risk.
Clear my choice
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Similar questions
- (a) Explain how return on investment might lead a divisional manager to reject new investments that could be profitable for the company as a whole. (b) How can this disadvantage be overcome?arrow_forwardThe trade off between efficiency and equity is major concern for government redistribution objective. The optimal trade off entirely depends on government objective. True or false, and explainarrow_forwardH1). ON ETHICS: From a corporate governance standpoint, paying higher premiums indicates a managerial determination to acquire targets at all costs. Given that EMNEs’ management is typically inexperienced in managing acquisitions in developed economies, as a shareholder of several EMNEs (such as those mentioned), do you support such managerial actions?arrow_forward
- Which of the following actions is a reason for privatizing government services? Select all that apply. To increase production efficiency To raise cash To improve service to the public To assist with economic growth in developing nationsarrow_forwardWhich one of the following actions by a financial manager creates an agency problem? Lowering selling prices that will result in increased firm value Agreeing to expand the company at the expense of stockholders' value Borrowing money when doing so creates value for the firm Agreeing to pay management bonuses based on the market value of the firm's stockarrow_forwardSecuritization has its upside (primarily liquidity and diversification), but it has its downside as well. Which of the following are potential downsides to securitization? Choose the best answer. Select one: Tax-avoidance and regulatory-avoidance Non-transparency Agency costs All of the abovearrow_forward
- Discuss why it is difficult for established companies to innovate in their business models? What approach would allow incumbents to overturn the conventions of their industries before others do?arrow_forward(Corporate Finance) How can employee compensation be designed to reduce agency costs?arrow_forward
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