The Fact That U

question 40

Multiple Choice

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

• A) an example of the monitoring problem in the United States.
• B) an example of X-inefficiency in Japan.
• C) due to the fact that the U.S. economy is much less competitive.
• D) due to the fact that there are more natural monopolies in the United States.

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Definitions:

Bond Offering

The process of issuing bonds to investors as a way of raising capital, where the issuer owes the holders a debt.

Indenture

A legal document that describes all the details of a debt security to potential buyers.

Covenant

A legal agreement or contract specifying certain conditions or actions that must be met or complied with.

Prospectus

A regulatory filing that describes all the details of a debt or equity security to potential buyers.