Companies offering higher risk securities have incentives to mask their true condition by
A)supplying overly optimistic financial information.
B)not having their financial statements audited.
C)listing on foreign exchanges where reporting requirements are less stringent than those in the U.S.
D)including testimonials from well known executives in their financial statements.

Question

Quizplus · Accepted Answer

Companies offering higher risk securities may be more likely to supply overly optimistic financial information in order to attract investors and maintain the appearance of financial stability. By presenting a positive image, the company may be able to sell securities at a higher price or interest rate than it otherwise would be able to.

Companies Offering Higher Risk Securities Have Incentives to Mask Their