If manager performance is easily observable, then
A)profits will be maximized for the firm.
B)the owner can directly reward the manager.
C)the manager will attempt to manipulate the reported profit.
D)the firm's stock price will go up.

Question

Quizplus · Accepted Answer

If manager performance is easily observable, the owner can directly reward the manager without worrying about the possibility of the manager manipulating reported profits. This can lead to greater motivation and better performance from the manager. However, it does not necessarily guarantee maximization of profits for the firm or an increase in the firm's stock price.

If Manager Performance Is Easily Observable, Then