Consider a CEO who holds neither stock nor stock options in the company she runs. Her payoff function regarding the firm's performance is most likely to resemble:

Question

Quizplus · Accepted Answer

The CEO's lack of stock or stock options suggests that her focus is not on the company's long-term performance or growth. Instead, her payoff function is likely to be similar to that of lenders, who have a fixed claim on the company's assets and are primarily concerned with receiving regular interest payments and the return of their principal investment. Hence, option B is the best choice.

Consider a CEO Who Holds Neither Stock nor Stock Options