Which one of the following actions by a financial manager is most apt to create an agency problem?

Corporate Finance

Which one of the following actions by a financial manager is most apt to create an agency problem?

refusing to borrow money when doing so will create losses for the firm
refusing to lower selling prices if doing so will reduce the net profits
increasing current profits when doing so lowers the value of the firm's equity
agreeing to pay bonuses based on the market value of the company stock rather than on the firm's level of sales

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Which one of the following actions by a financial manager is most apt to create an agency problem?Answer:increasing current profits when doing so lowers the value of the firm's equity .

Tags: Introduction to Corporate Finance

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