In which of the following examples do you expect conflicts of interest between management and owners...

In which of the following examples do you expect conflicts of interest between management and owners to be highest? Group of answer choices

A. A corporation in which the compensation package of the management is linked to the corporation ’s performance

B. A corporation with many shareholders

C. A partnership owned and managed by 2 partners

D. A corporation in which superfunds and investment companies hold a majority of its shareholding

Solutions

Expert Solution

Let us analyse each of the four options:

A. If the compensation package of the management is dependent on the performance of the company, the management will take extra care to ensure the company does well. This is in the best interest for the owners of the company as well. Thus, Low conflict of interest.

B. A corporation with many shareholders may have difference of opinions with the management, but both parties still have the best interest of the company in mind. The shareholders and the management want to increase sales and are looking out for the company for a long term. Thus, Manageable conflict of interest.

C. When the company is owned and managed by the same two people, the situation for an agency problem does not arise. Thus, Low conflict of interest.

D. When superfunds and investment companies invest in a company, they are not looking out for the growth or long term sustanance of the company, they are only looking to make back a profit on the money they have invested. Thus, opinions are highly likely to clash between the management and the major shareholders. Thus, Highest conflict of interest.

Thus, answer - D.

If this answers your question, please be sure to leave a positive rating!

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

which of the following actions would most likely to reduce potential conflicts of interest between stockholders...

which of the following actions would most likely to reduce potential conflicts of interest between stockholders and managers? A. make the bond covenants more restrictive B. pay managers cash salaries and give them no stock options C.make it more difficult for the board of directors to fire corporate managers D. promise managers that they will receive a generous compensation packages if the corporation is taken over by another firm E.None of the answers are correct

to what extent do you think agency problems and conflicts of interest are problems in the...

to what extent do you think agency problems and conflicts of interest are problems in the investment industry? To what extent do you think the internet boom was fueled by such problems?

Agency costs arising from the conflicts of interest between shareholders and bondholders do not impose any...

Agency costs arising from the conflicts of interest between shareholders and bondholders do not impose any real costs on the firm. Do you agree with this statement? Explain how shareholders can take wealth from bondholders through their investment, financing and dividend decisions. How can bondholders protect themselves? An article in an Asian business magazine argued that equity was cheaper than debt, because dividend yields are much lower than interest rates on debt. Do you agree with this statement? Please explain...

What do you see as the conflicts between customizing patient care to the needs of an...

What do you see as the conflicts between customizing patient care to the needs of an individual patient and standardizing care based on research?

What do you see as the conflicts between customizing patient care to the needs of an...

What do you see as the conflicts between customizing patient care to the needs of an individual patient and standardizing care based on research?

QUESTION 19 Which of the following would you expect to increase the equilibrium interest rate? A....

QUESTION 19 Which of the following would you expect to increase the equilibrium interest rate? A. an increase in the percentage of income after net taxes that households save B. an increase in the budget deficit C. a decrease in the profitability of investment projects firms are considering D. a change from an income tax to a consumption tax 4 points QUESTION 20 The period of expansion ends with a ________ and the period of recession ends with a ________....

Identify and evaluate examples of conflicts of interest raised in Part II of the Henrietta Lacks...

Identify and evaluate examples of conflicts of interest raised in Part II of the Henrietta Lacks book

Which of the following statements is correct? a. Conflicts can exist between stockholders and managers, but...

Which of the following statements is correct? a. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers. b. Most business in the U.S. is conducted by corporations, and corporations’ popularity results primarily from their favorable tax treatment. c.The good goal for a firm’s management is the maximization of expected net income. d. corporation have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of...

Which of the following redox reactions do you expect to occur spontaneously in the forward direction?...

Which of the following redox reactions do you expect to occur spontaneously in the forward direction? Check all that apply. Cd2+(aq)+Co(s)→Co2+(aq)+Cd(s) Pb(s)+Mn2+(aq)→Pb2+(aq)+Mn(s) Al(s)+3Ag+(aq)→Al3+(aq)+3Ag(s) Ni(s)+Pb2+(aq)→Ni2+(aq)+Pb(s)

Which of the following redox reactions do you expect to occur spontaneously in the reverse direction?...

Which of the following redox reactions do you expect to occur spontaneously in the reverse direction? pick all that apply 2Al(s)+3Pb2+(aq)→2Al3+(aq)+3Pb(s) Fe(s)+Mn2+(aq)→Fe2+(aq)+Mn(s) 2Cu+(aq)+Co(s)→2Cu(s)+Co2+(s) Ca2+(aq)+Zn(s)→Ca(s)+Zn2+(aq)

Subjects