Adverse Selection Is a Barrier to Financing Global Growth Because

question 214

Multiple Choice

Adverse selection is a barrier to financing global growth because

• A) firms sometimes have trouble determining whether they need funds or not.
• B) if investors have trouble identifying high-risk firms they may be unwilling to lend funds to creditworthy firms.
• C) there is the possibility that the funds are used for riskier behavior than the lender agreed to.
• D) of the differences between financing using loans, portfolio investment and foreign direct investment.

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Definitions:

Collateral Characteristics

Attributes or features that are parallel or supplementary to the main qualities or aspects of something or someone.

Personal Qualities

The characteristics, traits, or attributes that define an individual’s personality or demeanor.

Integrally Involved

Being essential or fundamental to the entirety of a process, activity, or existence.

Making Judgments

The process of forming opinions or conclusions about people, situations, or objects based on the information available, experiences, and reasoning.