There Are Obvious Incentives to Overcome Adverse Selection and Moral

question 159

Multiple Choice

There are obvious incentives to overcome adverse selection and moral hazard problems in the world of corporate finance. One way in which problems of moral hazard and adverse selection can be limited is through the use of programs in which managers and employees receive a share of profits earned by the firm. These programs are commonly known as

• A)fair profit exchange agreements.
• B)profit sharing agreements.
• C)earnings compatibility constraints.
• D)corporate earnings fairness.
• E)the economy of communion.

---

Definitions:

Authenticating Intent

the process of verifying that the actions or signatures of a person are genuine and intended to validate a legal document or agreement.

Indorsement

The act of signing a document, typically on the back of a negotiable instrument, indicating the legal transfer of its ownership.

Stamped Imprint

An impression or mark made on a document or item using a stamp, commonly used for validation or identification purposes.

Risk Of Loss

The potential that an asset's value could decrease, causing financial loss to its owner or holder.