Research has shown that executives who have large holdings of stock in their firm are more likely to have diversification strategies more consistent with shareholder interests, like increasing long-term returns.

Question

Answer the following statement true (T) or false (F)

Answer 1

True

Agents (executives) may have a stronger preference toward diversification than shareholders, because it reduces their personal level of risk from potential loss of employment. Executives who have large holdings of stock in their firms were more likely to have diversification strategies that were more consistent with shareholder interests, like increasing long-term returns.