Answer a. Conflicts would not exist if the Security and Exchange Commission were

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a. Conflicts would not exist if the Security and Exchange Commission were abolished. b. The threat of takeovers reduces conflict of interest problems, but only between bondholders and stockholders. c. Restrictions can be included in credit agreements, but these restrictions can do nothing to protect bondholders from conflicts of interest between them and the firm's managers and stockholders. d. Compensating managers with stock options can do nothing to help eliminate potential conflicts between stockholders and managers. e. Compensating managers with stock options can help reduce conflicts of interest between stockholders and managers, but if the options are all exercisable on a specific date in the near future, this can motivate managers to do something other than try to maximize the stock's intrinsic value.

Explanation / Answer

e.Compensating managers with stock options can help reduce conflicts of interest between stockholders and managers, but if the options are all exercisable on a specific date in the near future, this can motivate managers to do something other than try to maximize the stock's intrinsic value.

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