Emerging trends resulting from the agency problem are all of the following EXCEPT
A) large private corporations.
B) restructuring through leveraged buyouts.
C) prohibiting managers from maintaining an ownership interest.
D) management by active investors.

Question

Quizplus · Accepted Answer

Prohibiting managers from maintaining an ownership interest is not an emerging trend resulting from the agency problem. In fact, allowing managers to have an ownership interest can align their interests with those of the shareholders and mitigate the agency problem. The other choices are emerging trends resulting from the agency problem. Large private corporations may have less transparency and accountability than public corporations, increasing the potential for agency problems. Restructuring through leveraged buyouts can incentivize managers to improve the company's financial performance to pay off the debt, but can also lead to short-term thinking and neglect of long-term investments. Management by active investors, such as activist hedge funds, is becoming more popular as a way for shareholders to hold managers accountable and push for changes that increase value for shareholders.

Emerging Trends Resulting from the Agency Problem Are All of the Following