Reduction of risks not under management’s control:
　　A. may cause managers to overinvest.
　　B. makes stock options more valuable.
　　C. cannot improve management incentives.
　　D. can lead to lower incentive compensation.
　　Answer:D
　　When the uncertainty about firm performance that is not a result of management decisions and actions is reduced, incentive compensation for management is a less-risky source of compensation for managers, and they will accept a contract with lower expected incentive compensation as a result.