Which of the following are mechanisms that help minimize agency problems?
I.monitoring by boards of directors;
II.compensation tied to earnings and stock price;
III.transparent financial reporting;
IV.the threat of takeover

Question

Quizplus · Accepted Answer

All four mechanisms mentioned in the options are effective in minimizing agency problems. Boards of directors can monitor and guide management decisions to align them with the interests of shareholders. Compensation tied to earnings and stock price ties the management's incentives with the overall performance of the firm, which also benefits shareholders. Transparent financial reporting can keep investors and stakeholders informed about potential risks and returns. The threat of takeover can motivate management to perform better and take measures to increase shareholder value. Therefore, all four mechanisms together are most effective in minimizing agency problems.

Which of the Following Are Mechanisms That Help Minimize Agency