Which of the following are mechanisms that have evolved to mitigate potential agency problems? I) Using the firm's stock options for compensationII) Hiring bickering family members as corporate spiesIII) Boards of directors forcing out underperforming managementIV) Security analysts monitoring the firm closelyV) Takeover threats
A) II and V
B) I, III, and IV
C) I, III, IV, and V
D) III, IV, and V
E) I, III, and V

Question

Quizplus · Accepted Answer

Mechanisms such as using the firm's stock options for compensation (I), boards of directors forcing out underperforming management (III), security analysts monitoring the firm closely (IV), and takeover threats (V) are all strategies designed to align the interests of the managers with those of the shareholders, thereby mitigating potential agency problems. Hiring bickering family members as corporate spies (II) is not a recognized mechanism for addressing agency problems.

Which of the Following Are Mechanisms That Have Evolved to Mitigate