The agency problem refers to:
A)The risk that the agent does not behave in the principal's interest
B)Problems that occur between a corporate headquarters and its branches or heads of divisions
C)Top managers' unethical and fraudulent behaviors
D)The problem with using outside contractors.

Question

Quizplus · Accepted Answer

The agency problem pertains to the possibility that the agent, a party hired to act on another's behalf or interests (the principal), might have his or her own interests to look after, resulting in behavior that does not align with or even undermines the principal's objectives. This issue could occur, for instance, in a company where top executives manage the company on behalf of the shareholders. The management might prioritize their interests instead of maximizing shareholder value.

The Agency Problem Refers To