One financial intermediary in our financial structure that helps to reduce the moral hazard from arising from the principal-agent problem is the
A)venture capital firm.
B)money market mutual fund.
C)pawn broker.
D)savings and loan association.

Question

Quizplus · Accepted Answer

Venture capital firms typically provide funding to startup companies in exchange for equity in the company. This creates a situation where the venture capitalist has a stake in the success of the company, and therefore, is incentivized to closely monitor and oversee the actions of the company's management team, reducing the potential for moral hazard arising from the principal-agent problem.

One Financial Intermediary in Our Financial Structure That Helps to Reduce