In evaluating the pros and cons of corporate risk management,"market imperfections" refer to
A)information asymmetry,differential transaction costs,default costs,and progressive corporate taxes.
B)leading and lagging,receivables and payables,and diversification costs.
C)economic costs,noneconomic costs,arbitrage costs,and hedging costs.
D)management costs,corporate costs,liquidity costs,and trading costs.

Question

Quizplus · Accepted Answer

Market imperfections refer to situations where there is information asymmetry, differential transaction costs, default costs, and progressive corporate taxes. These market imperfections can impede the effectiveness of corporate risk management strategies. For example, if there is information asymmetry between a company and its investors, the company may not be able to accurately price its risks or find optimal hedging strategies. Differential transaction costs or taxes can also make it more expensive for a company to implement risk management strategies, leading to suboptimal outcomes.

In Evaluating the Pros and Cons of Corporate Risk Management,"market