Because information is scarce
A)helps explain why equity contracts are used so much more frequently to raise capital than are debt contracts.
B)monitoring managers gives rise to costly state verification.
C)government regulations,such as standard accounting principles,have no impact on problems such as moral hazard.
D)developing nations do not rely heavily on banks for business financing.

Question

Quizplus · Accepted Answer

Monitoring managers involves costs and difficulties in verifying the true state of a company's performance, which is known as costly state verification. This is a consequence of scarce information.

Because Information Is Scarce