Quiz 12

adverse selection

Adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives (e.g., resume misrepresentation and hiring decisions)

moral hazard

Moral hazard describes a situation in which information asymmetry increases of the party to take undue risks or shirk other responsibilities because the costs incur to another party (e.g., banks "too big to fail")

False

True or False: The Board governance practice of duality is where the role of chairman and CEO are separated. Please indicate if this statement is true or false.

False

True or False: The law and ethics are synonymous

True

True or False: The shareholder capitalism perspective is that the providers of the necessary risk capital and legal owners of public companies have the most legitimate on corporate profits.