The threat of a corporate takeover is an _________ incentive that helps to mitigate the _________ principal agent problem.

Question

Quizplus · Accepted Answer

The internal threat of a corporate takeover creates an incentive for the owner-manager to act in the best interest of the shareholders by maximizing profits and avoiding actions that could harm the company's value. This helps to mitigate the principal-agent problem that arises between the owner and manager, as the manager is less likely to engage in actions that benefit their own interests at the expense of the company. None of the other options accurately describe the relationship between the corporate takeover threat and the principal-agent problem.

The Threat of a Corporate Takeover Is an _________ Incentive