Why Do Corporations Want to Keep the Price of Their

question 151

Multiple Choice

Why do corporations want to keep the price of their stock high?

• A)A higher stock price increases the funds the firm can raise when it sells a given amount of stock.
• B)Corporations can pay their managers lower salaries and avoid principal-agent problems when stock prices are higher.
• C)Higher stock prices are correlated with lower expected profitability.
• D)All of the above provide incentive for corporations to keep the price of their stock high.

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Definitions:

Manipulated

Altered or controlled in a deliberate way, often to achieve a specific effect in an experiment or study.

Recall

The act of retrieving information or memories from the past, with or without the use of an explicit cue.

Cognitive Processes

Cognitive functions related to the acquisition, analysis, and retention of information.

Cognitive Processes

Mental activities involved in acquiring, storing, retrieving, and using information, including perception, memory, thinking, and language.