The Concept of Adverse Selection Helps to Explain All of the Following

question 33

Multiple Choice

The concept of adverse selection helps to explain all of the following except

• A) why firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets.
• B) why indirect finance is more important than direct finance as a source of business finance.
• C) why direct finance is more important than indirect finance as a source of business finance.
• D) why the financial system is so heavily regulated.

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Definitions:

Organization Structure

The arranged relationships and relative ranks of parts and positions within an organization, determining how roles, responsibilities, and power are distributed.

Implementing Work Policies

The process of putting into action the rules and guidelines designed to direct and regulate the behavior and decisions of employees at work.

Multiple Linkage Model

A leadership model that proposes leaders influence group performance through specific variables, including task structure and group atmosphere.

Managerial Behavior

The patterns of actions and behaviors exhibited by managers in directing and motivating employees, and in implementing strategies to achieve organizational goals.