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13) A lower dividend yield exacerbates the principal-agent problem between shareholders and management. a. True b....

13) A lower dividend yield exacerbates the principal-agent problem between shareholders and management. a. True b. False

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Answer #1


True: A lower dividend yield exacerbates the principal-agent problem between shareholders and management.

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Not always lower dividend yield is a problem but it can result in conflict or principal agent problem in case management is not performing in best interest of shareholders.

If organization doesn’t have good dividend policy such conflict arises and that can worsen the principal agent problem. Low dividend yields result can exacerbate the principal agent problem.

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