Question

An MNC may be more exposed to agency problems if most of its shares are held by:

a. a few mutual funds
b. a widely dispersed set of individual investors
c. a few pension funds
d. all of the above would prevent agency problems

Answer 1

A multinational corporation is more exposed to agency problems when its shares are held by many individual investors, due to less oversight compared to a few large investors like mutual funds or pension funds.

Step-by-step explanation:

An MNC, or multinational corporation, may be more exposed to agency problems if its shares are held by a widely dispersed set of individual investors. This is because when ownership is diffuse, there is less incentive for any single shareholder to engage in costly monitoring of management, leading to the potential for managers to act in their own interests instead of those of the shareholders. Conversely, a few large investors like mutual funds or pension funds have the incentive and power to monitor management closely and can act to align managerial actions with shareholder interests.