In an Owner-Manager Agency Relationship the Problem of Risk Aversion

question 1

Multiple Choice

In an owner-manager agency relationship the problem of risk aversion arises because:

• A) shareholders prefer the managers to take fewer risks in order to maximise the returns on their investment.
• B) managers prefer to make decisions that are less risky for the entity as they have more to lose than the shareholders.
• C) managers have less capital invested in the entity than shareholders.
• D) shareholders generally have no other sources of income.

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Definitions:

Moral Principles

Fundamental beliefs about what is right and wrong, which guide one's behavior and decisions.

Servant Leadership

A philosophy where the main goal of the leader is to serve others. This leader prioritizes the team's or organization's needs above their own.

Spiritual Leadership

A leadership style that emphasizes values, meaning, and a sense of purpose, often integrating personal beliefs and practices into leadership practices.

Authentic Leadership

A leadership style that is based on honesty, transparency, and ethical behavior, encouraging leaders to be genuine and to lead with their true selves.