Relying on prior research and using financial data from 2010 to 2015, we analyzed 7,750 observations from 1,815 publicly-traded companies in 341 industries representing the bulk of the American economy. We sought to test our hypothesis that stock options and other interventions only help a firms performance when its managers might otherwise misuse firm resources activities known as opportunism. Such opportunism is defined as self-interest seeking with guile and involves managers deploying firm resources for their own benefit, rather than to help shareholders achieve a higher return on investment. If such a risk exists, then stock options should reduce the misallocation of funds. If such a risk does not exist, then stock options are an expensive waste of money.

Question

Explain the central theory upon which PAT is based.	4 marks
Briefly outline the research approach adopted in the above study.	4 marks