Which of the following parties have the proper incentives to make risky,value increasing investments for the firm?

Question

Quizplus · Accepted Answer

Shareholders own a portion of the firm and therefore have a vested interest in its success and growth. They stand to benefit directly from value-increasing investments, which gives them an incentive to take on risk for the potential for higher returns. Suppliers and creditors, on the other hand, are not owners of the firm and do not stand to benefit directly from investments made by the company. Managers who are only compensated with a salary may not have the same level of direct incentive to take on risky investments that could benefit the firm.

Which of the Following Parties Have the Proper Incentives to Make