Which statement is describes a general disadvantage of going public?
A) It facilitates stockholder diversification.
B) It increases the liquidity of the firm's stock.
C) It establishes a market value for the firm.
D) It makes it easier for owner-managers to engage in profitable self-dealings.

Question

Quizplus · Accepted Answer

Going public can make it easier for owner-managers to engage in profitable self-dealings, such as granting themselves high salaries or buying assets from the company at inflated prices. This is because a public company has dispersed ownership and the management can be less accountable to individual shareholders. The other options (A, B, and C) are advantages of going public.

Which Statement Is Describes a General Disadvantage of Going Public