Podcast
Questions and Answers
What potential issue can arise from the overuse of stock options?
What potential issue can arise from the overuse of stock options?
- Managers becoming more cautious in their decision-making.
- Manipulation of information by managers to temporarily boost stock prices. (correct)
- Enhanced communication between managers and shareholders.
- Increased transparency in financial reporting.
How can boards of directors mitigate agency problems in firms?
How can boards of directors mitigate agency problems in firms?
- By encouraging managers to manipulate information for short-term gains.
- By firing underperforming managers. (correct)
- By avoiding monitoring management closely.
- By reducing transparency in financial reporting.
What role do large institutional investors play in monitoring firms?
What role do large institutional investors play in monitoring firms?
- They avoid involvement in the oversight of firms.
- They make the life of poor performers uncomfortable by monitoring closely. (correct)
- They ensure that poor performers remain in their positions.
- They encourage manipulation of financial information by managers.
How can unhappy shareholders potentially address lax monitoring by a board of directors?
How can unhappy shareholders potentially address lax monitoring by a board of directors?
What is a potential consequence for underperforming firms when one observes another underperforming business?
What is a potential consequence for underperforming firms when one observes another underperforming business?
What is the main concern regarding managers' manipulation of information to prop up stock prices temporarily?
What is the main concern regarding managers' manipulation of information to prop up stock prices temporarily?
How do stock options create an incentive for managers to act in a certain way?
How do stock options create an incentive for managers to act in a certain way?
What is the potential impact of boards of directors firing underperforming managers?
What is the potential impact of boards of directors firing underperforming managers?
What measure can unhappy shareholders potentially take against a board of directors that is not adequately monitoring management?
What measure can unhappy shareholders potentially take against a board of directors that is not adequately monitoring management?
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