Question

Absent government regulations to guard against fraud, why might top managers deceive investors about the true financial condition of their firms? top managers might want to deceive investors about the true financial condition of their firms ________.

Answer 1

Among other reasons, the two most important factors why top managers lie about the true financial condition of the firm is:

One, to cover liabilities that should be listed on the balance sheet. The purpose of this is to keep the firm's stock price up.
Two, to inflate profits to improve compensation tied to the firms profitability.