Providing an additional layer of management oversight

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Reference no: EM13948100

Which of the following statements is false?

Leverage can reduce the degree of managerial entrenchment because managers are more likely to be fired when a firm faces financial distress.

When a firm is highly levered, creditors themselves will closely monitor the actions of managers, providing an additional layer of management oversight.

According to the empire building hypothesis, high levels of free cash flow reduce agency problems.

Managers of large firms tend to earn higher salaries, and they may also have more prestige and garner greater publicity than managers of small firms. As a result, managers may expand (or fail to shut down) unprofitable divisions, pay too much for acquisitions, make unnecessary capital expenditures, or hire unnecessary employees.

Reference no: EM13948100

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