Question

Which of the following statements about governance mechanisms is misleading? a. Product market competition complements the market for corporate control and the market for private equity. b. As an external governance mechanism, private equity utilizes the stock market to discipline managers. c. Governance mechanisms can be classified as voice-based and exit-based mechanisms. d. In general, boards are likely to use "carrots" before considering "sticks."

Answer 1

B). As an external governance mechanism, private equity utilizes the stock market to discipline managers.

Step-by-step explanation:

Governance implies the process or act of governing or to make and administer the policies. It also implies the investigation of the proper enforcement or implementation of these policies among the corporations. Governance mechanism is described as the set of mechanisms that are employed to control and operate the corporations.

As per the question, option B exemplifies a misleading statement regarding governance mechanism as it offers a deceptive idea of 'external mechanism' as controlling the managerial mechanisms is the chief focus of ' internal mechanism'. Thus, option B is the correct answer.