A disadvantage of using stock options to compensate managers is that
A) it encourages managers to undertake projects that will increase stock price.
B) it encourages managers to engage in empire building.
C) it can create an incentive for managers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects.
D) All of the above.

Question

Quizplus · Accepted Answer

Stock options can incentivize managers to manipulate information to temporarily inflate stock prices, allowing them to benefit financially before the stock price adjusts to reflect the company's actual performance.

A Disadvantage of Using Stock Options to Compensate Managers Is