To Reduce the Principal-Agent Problem

question 164

Multiple Choice

To reduce the principal-agent problem

• A)boards-of-directors can tie the salaries of top management to the profitability of the firm.
• B)managers can take on more risk than they disclose to investors.
• C)managers can inflate profits on financial statements.
• D)managers can hide liabilities by not disclosing them on financial statements.

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Definitions:

Personality Disorder

A mental health disorder marked by long-standing patterns of behavior, thought, and personal experience that are not adaptive and vary significantly from the cultural norms of the individual's society.

Rigid

Describing an inability or unwillingness to adapt or change opinions, behavior, or actions despite new information or changing circumstances.

Interactions

Processes or actions taken by individuals or entities that affect each other.

Norepinephrine

A neurotransmitter and hormone involved in the body's fight or flight response, affecting attention and responding actions in the brain.