Which of the Following Statements Is False

Which of the following statements is false?

A) Controlling shareholders pay for their control rights because the firm effectively faces a higher cost of equity for outside capital.
B) Most countries follow what is called the stakeholder model, giving explicit consideration to other stakeholders-in particular, rank-and-file employees.
C) In a pyramid structure, a family first creates a company in which it owns more than 50% of the shares and therefore has a controlling interest.
D) A conflict of interest arises because the family has an incentive to try to move profits (and hence dividends) down the pyramid-that is, toward companies in which it has few cash flow rights and away from firms in which it has more cash flow rights.

Correct Answer:

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