Which of the following correctly describes moral hazard-type behaviour by managers?

Question

Quizplus · Accepted Answer

Moral hazard occurs when a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk. In the context of managers, it refers to situations where managers, after being hired, may act in their own interests rather than in the interests of the shareholders, as they do not bear the full consequences of their actions. This is accurately described in option B, where managers promise to increase sales and profits but then prioritize their own interests.

Which of the Following Correctly Describes Moral Hazard-Type Behaviour by Managers