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Admati and Pfleiderer (1994) Argued That by Having Both Inside

Question 1

Multiple Choice

Admati and Pfleiderer (1994) argued that by having both inside and outside investors contribute to a venture, ____________, and thus a rational continuation/termination decision would be made at each stage of development.


A) both information asymmetry and principal-agent problems are resolved
B) taxes and risk are both minimized
C) the overinvestment and underinvestment problems are balanced out
D) perception biases cancel out

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