Suppose that managers were given incentives in the form of restricted stock ownership (i.e., the stock is not easily sold)instead of outright stock ownership. One would expect such firms to have fewer agency problems.

Question

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Restricted stock ownership ties the manager's financial gain to the long-term success of the company, reducing the likelihood of short-term, self-interested decision making. This aligns the interests of the manager with those of the shareholders, leading to fewer agency problems.

Suppose That Managers Were Given Incentives in the Form of Restricted