Empirical studies have found that, across firms, Tobin’s Q ratio initi

Empirical studies have found that, across firms, Tobin’s Q ratio initially increases with managerial ownership fraction, but beyond a critical level, the ratio decreases with further increases in managerial ownership.

One argument for why this ratio decreases at higher managerial ownership levels is that:
a. board directors no longer believe that they need to monitor management’s incentives.
b. fewer passive shareholders own the firm’s stock.
c. outside blockholders tend to be attracted to firms with high managerial ownership, and outside blockholder ownership generally destroys firm value.
d. management can use their shares to leverage their entrenched position.

ANSWER

D