Admati and Pfleiderer (1994) argued that by having both inside and out
Admati and Pfleiderer (1994) argued that by having both inside and outside investors contribute to a venture, , and thus a rational continuation/termination decision would be made at each stage of development.
a. both information asymmetry and principal-agent problems are resolved
b. taxes and risk are both minimized
c. the overinvestment and underinvestment problems are balanced out
d. perception biases cancel out
ANSWER
C
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