Managers and Shareholders Have Differing Incentives Regarding the Firm

question 23

Multiple Choice

Managers and shareholders have differing incentives regarding the firm.The statement regarding incentives that is true is:

• A)Because shareholders' investment portfolios can be widely diversified they are less likely to want to undertake risky projects than managers
• B)A manager can fully diversify his/her risk by investing in other firms
• C)Managers may hold off paying dividends to owners in order to 'empire build'
• D)We would expect the horizon problem to lessen as a manager's age increases

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Definitions:

Excise Tax

A tax levied on specific goods, services, or activities, often included in the price of products like gasoline, alcohol, and tobacco.

Tax Revenue

The income received by the government from taxes imposed on individuals and businesses, used to fund public services and government obligations.

Leather Shoes

Footwear made from the hide of animals, treated for durability and flex.

Tax Revenue

The income that is gained by governments through taxation, which is used to fund public services and goods.