A venture capital firm protects its equity investment from moral hazard through which of the following means?

Question

Quizplus · Accepted Answer

By placing people on the board of directors, the venture capital firm can better monitor the borrowing firm's activities and ensure that the management is acting in the best interests of the company and its stakeholders. This helps to mitigate the risk of moral hazard, where the management may act in their own self-interest at the expense of the company and its shareholders. The other choices may also help to protect the venture capital firm's investment, but they do not specifically address the issue of moral hazard.

A Venture Capital Firm Protects Its Equity Investment from Moral