When Shareholders Pursue Selfish Strategies Such as Taking Large Risks

question 10

Multiple Choice

When shareholders pursue selfish strategies such as taking large risks or paying excessive dividends,these will result in:

• A) no action by debtholders since these are equity holder concerns.
• B) positive agency costs, as bondholders impose various restrictions and covenants which will diminish firm value.
• C) investments of the same risk class that the firm is in.
• D) undertaking scale enhancing projects.
• E) lower agency costs, as shareholders have more control over the firm's assets.

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Definitions:

KSAOs

An acronym that stands for Knowledge, Skills, Abilities, and Other characteristics; a framework used in human resources to evaluate and select candidates based on their qualification for a job.

Organization's Employees

The workforce or staff members who work under the umbrella of an organization, contributing to its objectives and goals.

Minor Function

A less critical or smaller part of a business operation or process, often supporting larger, more essential functions.

Outsourcing

The business practice of hiring external firms or individuals to perform tasks, handle operations, or provide services that are either difficult to manage or outside the company's core competencies.