Which of the Following Statements Is FALSE

question 38

Multiple Choice

Which of the following statements is FALSE?

• A) Controlling shareholders pay for their control rights because the firm effectively faces a higher cost of equity for outside capital.
• B) Most countries follow what is called the stakeholder model, giving explicit consideration to other stakeholders-in particular, rank-and-file employees.
• C) In a pyramid structure, a family first creates a company in which it owns more than 50% of the shares and therefore has a controlling interest.
• D) A conflict of interest arises because the family has an incentive to try to move profits (and hence dividends) down the pyramid-that is, toward companies in which it has few cash flow rights and away firms in which it has more cash flow rights.

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Definitions:

Organic Product

A compound containing carbon that has been formed as the result of a chemical reaction involving organic molecules.

Reaction

A method where substances combine and transform into one or more distinct substances possessing unique chemical and physical characteristics.

Organic Product

A natural substance or compound obtained through biochemical processes from organisms or their parts.

Reaction

A process in which substances interact to form new substances with different properties, involving a reorganization of atoms or molecules.