Which of the Following Statements Is Incorrect

question 71

Multiple Choice

Which of the following statements is incorrect?

• A)Managers may be tempted to make decisions that are in their own best interests rather than shareholder interests.
• B)The compensation of bank loan officers may be tied to loan volume, which encourages a loan department to extend loans with a very high concern for risk.
• C)To prevent agency problems, some banks provide stock as compensation to managers.
• D)The underlying goal behind the managerial policies of a bank is to maximize the wealth of the bank's shareholders.

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Definitions:

Certain Payoff

A guaranteed outcome or return from an investment, where the investor has absolute certainty over the amount to be received.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another.

Market Failures

Situations in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.

Government Intervention

Actions taken by a government to influence or regulate various activities within its economy.