Explanation:

An effective corporate governance structure mitigates default risks through properly functioning audit systems, transparent earnings reporting, and controlling information asymmetries between the company and its capital providers. Lower default risks lead to better credit ratings and reduced costs of debt borrowing, as creditors require lower returns when their funds are secured and rights protected. Thus, the correct answer is A.

• B is incorrect because strong governance practices enhance scrutiny and control mechanisms, mitigating risks and fraudulent activities, rather than reducing management control.
• C is incorrect because internal control mechanisms improve operational efficiency by monitoring and controlling decisions and activities, preventing risks and misconduct.