When Considering the Running of a Corporation, There Is a Principal-Agent

question 24

Multiple Choice

When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because

• A) shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits.
• B) the CEO is paid in part with stock options.
• C) shareholders cannot observe all of the CEO's decisions.
• D) shareholders sign confidentiality agreements.
• E) shareholders require the firm to pay a dividend.

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Definitions:

Student T Distribution

Student's t-distribution is a probability distribution used in statistics, especially for small sample sizes or unknown population variances, providing a basis for the estimation of population parameters.

Degrees of Freedom

The number of independent pieces of information that go into the estimation of a parameter or calculation of a statistic.

Normal Distribution

The probability distribution is evenly spread around the mean, signifying more frequent occurrences of data points near the mean than those that are more distant.

Exponential Distribution

The exponential distribution is a continuous probability distribution that is often used to model the time between events in a process that occur continuously and independently at a constant average rate.