1. Other factors held constant, which type of firm would be more likely to fully retain...

1. Other factors held constant, which type of firm would be more likely to fully retain (self-insure) its workers compensation losses?

(a) A firm with an individual shareholder who owns 50% of the stock versus a firm in which no single shareholder owns more than 1% of the stock.

(b) A trucking firm with 5,000 drivers versus a manufacturing firm with 5,000 workers at a single plant.

(c) A firm with operating profits positively correlated with claim costs versus a firm with operating profits uncorrelated with claim costs.

(d) A firm with a large amount of debt in its capital structure versus a firm with no debt.

THIS IS NOT A MULTIPLE CHOICE QUESTION. DESCRIBE A FIRM THAT WOULD CHOOSE TO RETAIN THE LOSS AND WHY UNDER EACH CIRCUMSTANCE.

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Expert Solution

hello I am answering this Question as per your need hope it will help you and if so kindly give me a thumbs up. If you have any Query then do comment it would be a great pleasure to assist you further.

A) I usually prefer a company whose shareholder do not hold more that 1% of share as because if any share holder who has 50% of share he/she has power in management to take more action against company policy to withdraw or to introduce new policies, so it would be far better for workers to have share holders with less holdings.

B) A manufacturing firm with 5000 workers would be preferable as because manufacturing firm has their own incentive plans which depends upon productivity of workers so its better to do work in the manufacturing concern.

C) A firm with operating profits positively correlated with claim costs is preferable as because there is no contingency cost which may lead to turn profit into loss so everything is crystal clear for every worker to work in that company.

D) In this case a firm with no debt is preferable as because if firm doesn't have any interest burden then company can distribute the extra profit or introduce incentives plan which may lead to increase in profit margin workers productivity of company.

jeff jeffy answered 1 year ago

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