Which of the following are negative consequences of compensating managers with stock? Question 14 options: a) Stock compensation can attenuate management shirking and risk aversion b) Stock compensation forces management to bear high levels of ﬁrm-speciﬁc risk, which cannot be diversiﬁed away c) Stock compensation allows a risk-averse manager to be assured of a minimum level of pay d) Stock compensation is less susceptible to market wide effects outside of management control

Providing managers with stock as a form of compensation might in fact have unfavorable outcomes,…

Answered: Which of the following are negative…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

TRUE OR FALSE 1. Market psychology describes the common practices and overall emotion of market participants at any given period 2. Market behavior and emotions impact the overall market performance. 3. A disciplined trader does not expect a stock to breakout. 4. In order to control emotions when trading, one should do research before making a decision. 5. A strong conviction will eventually lead to higher probability of success in trading.
If the intrinsic value of a stock is below the current market price, over time we can expect buy orders to exceed sell orders, causing the price to rise buy and sell orders to be evenly matched, keeping the price at its current level sell orders to exceed buy orders, causing the price to rise sell orders to exceed buy orders, causing the price to fall buy orders to exceed sell orders, causing the price to fall
Which statement is NOT correct? Investors can NOT eliminate market risk by adding more stocks to the portfolio. Firm specific risk cannot be eliminated through diversification. Standard deviation of return is a good measure of total risk for a stand-alone security. The only relevant risk for a well-diversified portfolio is non-diversifiable risk.
MNCs generally do not need to hedge because shareholders can hedge their own risk. Group of answer choices True False
Statement I: Systematic risk is the inherent certainty in the market which cannot be diversified. Statement II: Unsystematic risk is the inherent certainty in the company which can be diversified. Statements I and II are true. Statement I is true. Statement II is true. Statements I and II are false.
QUESTION 9 If markets are semi-strong efficient, which of the following situations is most likely to yield abnormal returns? O 1. Following the advice of your stockbroker's newsletter O 2. Identifying a pattern in a company's historical stock price O 3. Obtaining insider information Analysing a company's earning report
What types of firms would we expect to observe higher direct agency costs of equity, such as consuming excessive perquisites by management ? Question 7 options: a) Firms with high free cash flows b) Firms with fewer growth opportunities c) Firms with weak governance structures d) All of the above options are correct e) None of the options are correct
An increase in a firms inclination to pay dividends may be because of a decline in profitable investment opportunities in the future. is this true or false and why. relevant or not, frequent changes in dividend policy can harm a firm. is this true or false and why. what is the essential feature of a forward contract that makes a futures contract a type of forward contract,
7
4. What forms of market efficiency are violated if investors overreact to good news, resulting in stock price increases followed by stock price decreases: a. Semi-strong form efficiency b. Strong-form efficiency c. Both 1 and 2 d. Neither 1 nor 2
Explain Limitations that have caused some companies to reduce their use of portfilio analysis. 1. Naively following the prescriptions of a portfolio model may actually reduce corporate profitsif they are used inappropriately.
Suppose a public company compensates its risk averse managers with stock awards rather than stock options, and the company's stock price has fallen precipitously. In this setting, using stock awards will induce more risk taking by management versus the use of stock options. Question options: a) True b) False

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