Which of the Following Statements Is FALSE

question 7

Multiple Choice

Which of the following statements is FALSE?

• A)Controlling shareholders pay for their control rights because the firm effectively faces a higher cost of equity for outside capital.
• B)Most countries follow what is called the stakeholder model,giving explicit consideration to other stakeholders-in particular,rank-and-file employees.
• C)In a pyramid structure,a family first creates a company in which it owns more than 50% of the shares and therefore has a controlling interest.
• D)A conflict of interest arises because the family has an incentive to try to move profits (and hence dividends)down the pyramid-that is,toward companies in which it has few cash flow rights and away from firms in which it has more cash flow rights.