Question

Which of the following statements is CORRECT?

		One of the ways in which firms can mitigate or reduce potential conflicts between bondholders and stockholders is by increasing the amount of debt in the firm's capital structure.
		The threat of takeovers tends to decrease potential conflicts between stockholders and managers.
		Managerial compensation plans cannot be used to reduce potential conflicts between stockholders and managers.
		The threat of takeover generally increases potential conflicts between stockholders and managers.
		The creation of the Securities and Exchange Commission (SEC) has eliminated conflicts between managers and stockholders.

Answer 1

The threat of takeover generally increases potential conflicts between stockholders and managers. - This statement is correct.'

Statement 1 is incorrect. Increasing debt increases potential conflicts

Statement 2 is incorrect. The threat of takeovers tends to increase potential conflicts between stockholders and managers.

Statement 3 is incorrect. Managerial compensation plans can be used to reduce potential conflicts between stockholders and managers.

Statement 5 is incorrect. It has not eliminated conflicts

answered by: anonymous