One argument for why subsidiaries should be only partly-owned by the parent is:
A) that the potential conflict of interests between the MNC's managers and shareholders is avoided.
B) that the potential conflict of interests between the MNC's majority shareholders and minority shareholders is avoided.
C) that the potential conflict of interests between the MNC's existing creditors is avoided.
D) to motivate subsidiary managers by allowing them partial ownership.

Question

Quizplus · Accepted Answer

Allowing subsidiary managers to have partial ownership provides them with the incentive to work hard and increase profits in order to increase the value of their ownership stake. This aligns their interests with those of the parent company and can lead to improved overall performance. Options A, B, and C are not directly related to the issue of partial ownership of subsidiaries.

One Argument for Why Subsidiaries Should Be Only Partly-Owned by the Parent